VIDEO: Microsoft Update Puts Marvell in the Spotlight

Chris Versace sat down to discuss the key economic data and earnings reports the Portfolio will be focused on this week.

As part of that, he explained why recent developments, or lack thereof, between the U.S. and Iran could lead investors to look through this week’s July CPI and PPI data. Chris also explained why Microsoft’s (MSFT) Maia 300 chip initiative is another reason for us to remain bullish on the shares of Marvell (MRVL). He also went over why we think Boeing’s (BA) move with Archer Aviation (ACHR) is a good one.

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At the time of publication, TheStreet Pro Portfolio was long MSFT, MRVL and BA.

Transcript

Hey folks, it is Monday, August 10th, and you’re probably noticing that the market’s a little bit in the red today as we contend with the extending timeline between the US and Iran, the rebound in oil prices, and candidly the latest batch of quarterly results. On the economic front, not a lot of fresh data today, but we will have several pieces that we’ll want to be focusing on over the next couple of days. We’ve got some high-profile earnings coming as well that will help us revisit the AI and data center trade. And I’ve got a few comments about two companies in the portfolio: one Microsoft, the other being Boeing. So let’s, as they say, get to it.

On the economic data we’re going to have this week, really tomorrow, Wednesday, Thursday, and Friday will be what we’re looking at here. Tomorrow in particular, we have the weekly ADP employment change data. Now, typically we don’t look a lot at weekly data — it can be kind of noisy — but this time around we will be paying a little more attention to it. The why: you could probably guess from what we saw in Friday’s July employment report, with the negative print for the month of July, but also those big revisions lower for May and June. So we’re going to want to see what is happening now that we’re continuing to move forward — what are we seeing in terms of the start of the end of seasonal employment for the summer? But also, looking at the weekly data compared to the last several weeks should allow us to get a sense of how much of the July employment report was due to the winding down of summer.

So that’s tomorrow. Wednesday and Thursday are the big data points for the week — CPI and PPI for July. We talked about them in Friday’s July monthly roundup, so I’ll spare some of those comments. But remember that when we were building up to those comments about what the market expects for this week on CPI and PPI, we were talking about the net move in oil for the month of July. A lot of people were concerned about the sharp rebound we saw mid-month, but remember, it did kind of fade toward the end of July. And the bottom line was, when you looked at the numbers published by the Energy Information Administration, we actually saw oil prices tick a little bit lower in July compared to June. So the thinking is that can help with some of those comparisons.

However, because the market is a forward-looking animal, as are we, the comments about the extended duration of the US-Iran conflict and renewed uncertainty over how soon this might be over — especially President Trump’s comment, which we discussed in our opening comments this morning, that they are taking a low-key approach and letting economics and economic pain do some of the work for them on the negotiating front — raise some questions as to how much longer the US-Iran conflict will go, how much longer the strait will be closed, and the disruptions to oil, energy prices, and potential supply chains. So that explains why oil is moving higher.

I also think the market is going to take a bit more of a wait-and-see approach, especially following those multiple comments last week that a deal is right around the corner, a deal is right around the corner. We’ve been cautiously optimistic, I’ll phrase it — some would say skeptical — but we’re going to continue to follow the traffic through the strait. For us, it’s always going to be about when we see the volumes pick up on a sustained basis. As a result, there is a growing thought, and we’re in that camp, that despite the numbers we might see out of the July CPI and PPI reports, with an eye toward monetary policy, we’re more likely now to look through them and instead focus on some of the August data — especially if we see oil prices continue to climb over the next several days.

With that in mind, the next real data point we’ll be eyeing for what’s potentially next, at least on the inflation front and therefore monetary policy, will be the Flash PMI report for August, which S&P Global will print on August 21st. Note that the timing is right before the Fed’s Jackson Hole event, and before the comments new Fed Chair Kevin Warsh will be making at that event. I’ll cap it here and say, as you’ve grown accustomed to hearing us say over the last few months, we’ll continue to track developments on all these fronts as they relate to inflation and monetary policy, and if we need to make any position movement within the portfolio, rest assured we will do that as needed.

Now, in terms of tracking developments, Microsoft is planning a custom AI silicon event as soon as next month, September. It’s going to be a big month for September — we’re going to have a number of investor conferences where management teams will be presenting and updating their thinking incrementally. During those presentations we’ll also have Apple’s event, and potentially something from Microsoft and a few others as well. With Microsoft, the event, as I mentioned, is going to be around a custom AI silicon announcement. The thought process behind it is that Microsoft is meanwhile negotiating with Taiwan Semiconductor for delivery capacity for 2027, as it appears Microsoft will be following in the footsteps of Amazon — and by that I mean looking to win external business with other cloud customers, potentially Anthropic, OpenAI, and others — and it’ll be doing so with its next chip iteration, called Maia 300.

Now, what’s key about this? Well, it’s the size of the potential orders that Microsoft is discussing with Taiwan Semiconductor. Initial reports say around 300,000 chips for 2027, with ultimate capacity potentially being more than 1 million, again for these Maia 300 chips. That compares to a reported figure of tens of thousands for the current Maia 200 chips. So Microsoft is looking to step up in a big way, again following on the heels of Amazon and the commentary from Amazon management about the size of that custom silicon business — it has simply become extremely, extremely large.

Now, here’s the thing as it relates to the Maia 300 business: Marvell, one of our holdings in the portfolio, is the primary custom silicon design partner for Maia 300. So when we tie together all these comments about hyperscaler capital spending, about Amazon really leaning into the chip business with other cloud providers, and now Microsoft following suit, this tells us that Marvell should not only have a very, very solid quarterly report when they report on August 27th, but their guidance should be favorable as well. It also backs the multi-year outlook that Marvell management has been talking about ever since the start of this year.

So as we mark our calendars for August 27th, we’re going to want to make another marking, and that is for October 6th. The why: that is when Marvell will hold its next analyst day. And if you remember its analyst day last year, that is really where it took the wraps off its initial multi-year forecast for AI, custom silicon, and networking — all the things that kept us very positive on the shares. Again, that was the initial forecast, and they have since stepped that up. Given the developments over the last few weeks, I wouldn’t be surprised if Marvell does that again. A lot to look forward to on August 27th.

Now I also want to talk quickly about Boeing. This comment comes ahead of the expected July delivery report that Boeing will be sharing later this week. Today, Boeing announced it will combine its Wisk Aero, SkyGrid, and Insitu subsidiaries into Archer Aviation, ticker symbol ACHR. Here’s the thing: Boeing will retain access to Wisk’s core autonomous flight technology for its current and next-generation commercial and defense aircraft.

Now, as we think about this, it is moving three subsidiaries that Boeing is arguably spending a good amount of R&D dollars on into Archer. We see that as a positive move for Boeing because it’s simply going to allow Boeing to focus on its core business — and by that we mean ramping commercial delivery capacity and getting its margins back in line with where they’ve historically been. Remember, those are the things that led us to add the company’s shares to the portfolio. So we see this as simply a greater-focused Boeing. Here’s the thing, though: the transaction is also going to allow Boeing to participate in any potential upside from those businesses, because it is getting a stake in Archer. Full details haven’t been announced yet, but eventually they will be disclosed, most likely in an 8-K or potentially a 10-Q filing. So we will be on the lookout for that.

Now, continuing our comments about the economic data for the next several days — even though there aren’t any major earnings out this morning — we will be having earnings over the next couple of days, including this afternoon and Monday, Tuesday, Wednesday, from CoreWeave, Supermicro, and of course Applied Materials and Cerebros on Thursday. We’ll be connecting the dots of our learnings back to our holdings from each of those reports. We’ll be doing something similar with the reports out from Surgery Partners, Keel Infrastructure, and a few others. So a lot, a lot coming your way.

I also want to share that I am going to be revisiting the shares of Neostellar Corp, which have sold off even more following our comments from last week. What I’ll be talking about are some incremental comments to the ones we put out last week. I think it’ll bring some sobering perspective on some of what we said, and perhaps some hopeful reminders about why the portfolio remains long Neostellar shares.

Now, I will say this, friends: it is going to be a hot and humid time as we close out the dog days of summer. Maybe you haven’t noticed, but sunsets are coming earlier and earlier, and today, at least on the East Coast in the DC area, it’s going to be the last sunset after 8 p.m. And before you know it, back to school is beginning. I have a teacher in my family who has gone back to school today; students arrive next Monday. So things are going to get a little busy over the next week and into the following one. But remember, we are going to be here to help guide you through it.

And with all that, my friends, be sure to check your emails and your alerts. We want to make sure you get our latest thoughts, and if we happen to make any moves with the portfolio, we want you right there with us. Thanks for watching.