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<video src="https://www.youtube.com/embed/HZI2nC2fNlI" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_d5b7980f1771879002772.jpeg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/HZI2nC2fNlI&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_d5b7980f1771879002772.jpeg&quot;}"></video>NVIDIA <a href="https://genemunster.com/nvidia-preview-cy26-estimates-are-moving-higher-but-the-debate-is-2027/" target='__blank'>reports Wednesday</a> after the close, and the near-term setup is familiar: the Street expects another strong quarter powered by Data Center demand, with guidance that keeps the AI infrastructure buildout humming into the April quarter. What’s different this time is the market’s attention span. Investors already “know” the January quarter should be solid; the real debate is whether NVIDIA can sustain growth and mid-70s gross margins as hyperscalers step up in-house silicon efforts (custom ASICs/TPUs) and as the narrative transitions from “Blackwell ramp” to “Rubin roadmap.”Expectations Into the PrintConsensus expectations are centered around quarterly revenue around $66-67Bs, EPS in the mid-$1.50s neighborhood, and gross margin guidance around the mid-70s. NVIDIA’s prior framework has effectively set the baseline, which means the stock reaction is likely to be driven less by “beat vs. miss” and more by magnitude, mix, and tone. In plain English: a normal beat might not be enough if the market is leaning to a bigger beat, and a great quarter can still get punished if margins or forward commentary wobble.The CES Message that MatterEven without a formal mid-quarter update, management used CES in early January to push two investor-critical ideas: demand is still running ahead of supply, and long-range visibility is expanding, not contracting. The most important “guidance” from that period wasn’t a quarterly number — it was the repeated emphasis that the multiyear Blackwell + Rubin opportunity through the end of calendar 2026 is substantial, with hints that the prior yardstick could prove conservative. Investors want to hear that message repeated on the earnings call, ideally with enough specificity to feel like it’s more than vibes.What to Watch in Results and GuidanceFirst: Blackwell ramp quality, not just volume. The market will focus on what’s shipping (higher-value configurations, rack-scale deployments, system-level wins) and whether supply is improving without demand cooling. Mix matters because it flows directly into revenue density and, just as importantly, margin durability.Second: Data Center platform breadth. NVIDIA’s story keeps moving from “GPU supplier” to “full-stack platform” (GPUs, networking, systems, software). Continued strength in networking and system-level deployments reinforces switching costs and supports the argument that internal accelerators won’t easily displace NVIDIA across the full set of workloads.Third: China commentary. China is both an upside lever and a headline risk, and it’s messy because it combines policy uncertainty with rising domestic competition. Investors will care less about any single-quarter datapoint and more about how management frames demand: delayed vs. structurally impaired, and whether guidance implicitly assumes conservative China contribution again.Fourth: Gross margins. This is the fastest way for a “beat” to turn into a selloff. NVIDIA has trained the market to treat mid-70s gross margin as the proof of pricing power and platform leverage. Any hedging around the sustainability of mid-70s margins — especially heading into the Rubin ramp and with memory/input cost volatility — will be scrutinized.Hyperscaler CAPEX: Tailwind but Now with RoI Question MarkThe capex backdrop still looks supportive: the biggest buyers are acting like AI infrastructure is a multi-year priority, not a one-quarter science project. But the market has started asking a different question: “Great, but what’s the return?” That matters because when ROI anxiety rises, customers get more motivated to optimize cost-per-token and negotiate harder — which is where internal silicon becomes more than just a lab project. The key earnings-call tell will be whether NVIDIA can credibly argue (through demand visibility, mix, and margin confidence) that its share of hyperscaler spend remains resilient even as customers diversify architectures.The Custom ASIC Concern: The Bear Case in One ParagraphThe bear case is simple: NVIDIA’s largest customers are also its most capable competitors, and internal accelerators (TPUs/Trainium/MAIA/MTIA, etc.) can absorb a growing slice of incremental AI workloads over time — especially inference, where cost sensitivity is high and workloads are more standardized. Even if NVIDIA remains the premium choice, any meaningful shift in workload mix toward in-house silicon can pressure NVIDIA’s growth slope or pricing power at the margin.NVIDIA’s rebuttal is also straightforward: performance-per-watt, time-to-deploy, broad model compatibility, software ecosystem (CUDA), and a supply chain that can deliver at scale. The earnings call won’t “settle” this debate, but it can shift the odds if NVIDIA shows it can maintain mid-70s margins while continuing to grow through the platform stack.What Bears Will Hammer if the Stock SlipsBears don’t need a revenue miss to win the day. They’ll focus on two things: (1) any sign that mid-70s gross margin is structurally harder to sustain as platforms get more complex and costs rise, and (2) any indication that guidance is becoming more cautious because customers are optimizing spend or shifting incremental demand toward internal accelerators. Add in a third accelerant — China uncertainty framed as structural rather than timing-related — and you have a recipe for a “good quarter, bad stock reaction” kind of night.Valuation and Price Action: Why this Print is Still DangerousWhen expectations are high and the narrative is well understood, the stock trades on what changes, not what repeats. That’s why you can get the classic outcome where NVIDIA beats and raises, but the stock still sells off because guidance doesn’t clear the whisper number, margins look a touch less bulletproof, or management doesn’t give the market fresh reasons to believe 2027–2028 stays strong. Yes, it’s irrational. No, it won’t stop happening.Bottom Line into WednesdayIf NVIDIA delivers a clean beat/raise, keeps gross margin confidence anchored in the mid-70s, and reiterates (or strengthens) multiyear visibility tied to Blackwell and Rubin, it supports the “still early innings” framing and forces the market to take the longer runway more seriously. If any one of those pillars wobbles — especially margins — the stock can still trade like a cyclical, no matter how loud the AI demand story remains. Because nothing says “future of computing” like the market’s ability to panic about next quarter.

us_low_importance

Stock

NorthAmerica

Semiconductor

US Tech

Artificial Intelligence

Nvidia

Ethereum Classic

NVIDIA Earnings Showdown: Blowout Beat… or the First Crack in the AI Supercycle? 

<video src="https://www.youtube.com/embed/HZI2nC2fNlI" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_322191721771872195834.jpeg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/HZI2nC2fNlI&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_322191721771872195834.jpeg&quot;}"></video>President Trump will deliver his <a href="https://apnews.com/article/trump-state-of-union-affordability-9dd2fe1f3ba81bddd4ad115356131b41" target='__blank'>State of the Union address</a> Tuesday night at a moment of unusual political and economic tension. With approval ratings under pressure, midterm elections looming, and the Supreme Court having just curtailed his use of emergency tariff powers, the speech carries more political weight than typical annual addresses. For investors, however, the key question is simpler: which industries stand to benefit from the policy themes likely to dominate the evening?The clear centerpiece is expected to be the economy. Polling shows voter dissatisfaction with inflation, housing costs, groceries, and utilities remains elevated. Trump is likely to frame his first thirteen months of his second term as a transition period inherited from prior policy decisions, while emphasizing tax cuts, reshoring manufacturing, and energy expansion as core solutions.From a <a href="https://www.cfr.org/articles/donald-trump-delivers-the-state-of-the-union-address-tuesday-night" target='__blank'>market perspective</a> , the industries most likely to see rhetorical tailwinds include energy, domestic manufacturing, defense, housing, and certain industrial sectors.Energy is likely to feature prominently. Vice President JD Vance has previewed that Trump will speak about lowering energy costs, and the administration has consistently linked domestic drilling and production to affordability. Oil &amp; gas producers, LNG exporters, pipeline operators, and refining companies could see renewed emphasis. If Trump doubles down on permitting reform or expanded drilling access, the sector may view it as supportive, particularly as energy costs filter into broader inflation narratives.Manufacturing and reshoring will also be front and center. Expect language around “bringing jobs back” and building new factories domestically. Companies tied to industrial automation, heavy machinery, steel, construction materials, and semiconductor manufacturing could be positioned as beneficiaries. Defense contractors may also gain attention given the administration’s assertive posture toward Iran and continued geopolitical tensions.Housing affordability is likely to be a major talking point. Trump has repeatedly referenced lowering mortgage rates and boosting supply. While the White House does not directly control interest rates, investors will watch for proposals involving tax incentives for homebuilders, regulatory reform, zoning flexibility, or targeted housing credits. Homebuilders, building materials firms, mortgage lenders, and home improvement retailers could all react to any perceived policy support. The affordability narrative also ties into potential relief measures for first-time buyers or expanded credit access.Healthcare may also enter the discussion, particularly around prescription drug pricing. Trump has referenced efforts to create government-backed purchasing platforms or websites to lower drug costs. Managed care companies, PBMs, and pharmaceutical firms could move depending on the tone. If rhetoric targets drug pricing aggressively, it could pressure certain large-cap pharma names, while healthcare distributors or generics manufacturers might benefit.Trade policy remains the wild card. The Supreme Court’s ruling striking down much of the administration’s use of the International Emergency Economic Powers Act has reshaped the tariff landscape. Trump has already responded with a 15% global tariff under Section 122 authority, which is temporary and capped at 150 days without congressional extension. Investors will be watching for clarity on how aggressively the administration intends to pursue Section 301 or Section 232 investigations to replace those tariffs.Industries sensitive to imported materials—retail, autos, consumer electronics, and building supplies—will be particularly attuned to any escalation. Domestic steel, aluminum, and select industrial manufacturers could benefit if protectionist measures expand. However, tariff uncertainty has historically weighed on equity multiples, particularly in consumer discretionary and multinational sectors.Affordability remains the political pressure point. Inflation data has moderated from its peak but remains sticky in key household categories. The administration may highlight tax relief under the One Big Beautiful Bill Act, while signaling regulatory efforts aimed at consumer credit, energy costs, and supply chains. However, analysts note that major new fiscal packages appear unlikely this year, limiting the scope of near-term stimulus.Foreign policy will also be closely watched. The administration’s posture toward Iran has intensified, and military positioning in the Middle East has increased. Defense contractors and aerospace firms could respond positively if the speech signals sustained defense spending or geopolitical firmness. However, markets generally prefer stability, and any escalation rhetoric could create short-term volatility, particularly in energy prices.Politically, this promises to be a contentious evening. Democrats are expected to challenge the administration’s claims on affordability and tariffs, and the reaction in the chamber could draw as much attention as the speech itself. Historically, dramatic moments—whether protests, applause lines, or partisan exchanges—often dominate headlines more than policy specifics.For investors, it is worth remembering that State of the Union speeches rarely have lasting effects on stock markets. While sectors mentioned favorably may see short-term moves, these reactions often fade quickly. In many cases, markets exhibit a “sell the news” pattern, particularly if expectations were already elevated heading into the event. Unless accompanied by concrete legislative proposals or executive actions, rhetoric alone seldom alters long-term earnings trajectories.In short, Tuesday’s address is likely to focus heavily on the economy, reshoring, energy, housing affordability, and a continued commitment to tariffs in modified form. Defense and energy could see supportive language, housing and manufacturing may be framed as central to economic renewal, and healthcare affordability may resurface as a talking point.But investors should temper expectations. Presidential speeches can shape narratives, but fundamentals—earnings growth, inflation data, interest rates, and global stability—ultimately drive markets. Tuesday night may generate headlines and short-term sector rotations, but the long-term trajectory of equities will depend far more on policy execution than on the words delivered from the House chamber.

Middle-East

Trump concept

Military

Trump’s State of the Union: Which Stocks Could Soar — and Which Could Sink — After the Speech?

The immediate spark for takeover interest is a dramatic collapse in PayPal's stock. Over the last 12 months, shares have fallen <a href="https://finance.yahoo.com/news/paypal-attracts-takeover-interest-stock-162731815.html">around 46%</a>, wiping out nearly half the company's value and leaving it with a market value of about $38.4 billion. This steep decline followed a weak fourth-quarter report that missed both revenue and earnings estimates, triggering a leadership change as CEO Alex Chriss stepped down. The company also <a href="https://rollingout.com/2026/02/23/paypal-ceo-exit-earnings-miss/">withdrew its long-term financial targets</a>, a move that signals a strategic reset after its turnaround plan fell short.The Q4 results were a clear disappointment, with the company's branded checkout segment showing particularly weak performance as revenue growth slowed to just 1%. This deceleration, coupled with a broader continued slowdown in payment volume, intensified investor frustration. The stock's plunge of more than 20% on the earnings day underscored the market's verdict. The leadership shake-up and the removal of forward-looking guidance have left shareholders without a clear roadmap, creating a vacuum that has invited suitors to step in.Now, with the company's valuation at extreme lows-trading at less than eight times forward earnings, a steep discount to peers-the combination of a distressed asset and a strategic reset has made PayPal a potential acquisition target. The preliminary meetings with banks and interest from both potential buyers eyeing the whole company and specific assets highlight how the recent slump has fundamentally changed the calculus.<h2>The Distressed Asset: Financial Underperformance</h2><img src="https://cdn.ainvest.com/aigc/hxcmp/images/compress-qwen_generated_1771868886113.jpg.png" style="max-width:100%;"/>The core business deterioration is now clear. PayPal's fourth-quarter results showed a company under significant pressure. Adjusted profit came in at <a href="https://www.reuters.com/business/paypal-sees-2026-profit-below-estimates-holiday-quarter-results-fall-short-2026-02-03/">$1.23 per share</a>, missing estimates by 4%. More telling is the outlook: for 2026, management expects either a low-single digit decline in earnings or only slightly positive growth, a stark contrast to Wall Street's expectation of about 8% growth.This slowdown is concentrated in the company's key growth engine. Total payment volume grew just 6% on an FX-neutral basis, but the critical branded checkout segment saw its revenue growth decelerate to a mere 1% for the quarter. That's a sharp drop from the 6% expansion seen a year earlier. The company directly cited weaker U.S. retail spending due to high interest rates and consumer caution as a key pressure point, a trend that hit its higher-margin branded business hardest.<backtest-component code="PAYPAL" id="event_002" range="3" market="185"></backtest-component>The bottom line is a fundamental loss of momentum. What should be a peak spending quarter for a payments firm turned out lackluster, with revenue of $8.68 billion missing estimates. This isn't a temporary blip; it's a sustained deceleration in the core business that management has acknowledged by pulling its long-term targets. The financial underperformance creates the distressed asset profile that makes a takeover compelling-there's a clear operational problem to solve, and the valuation has already priced in deep skepticism.<h2>The Strategic Play: Why Buyers Might Be Interested</h2>The distressed asset profile is a clear catalyst, but the real strategic calculus for potential suitors lies in what they could do with PayPal's scale and brand. The preliminary meetings with banks and interest from a large rival for the whole company suggest a buyer sees value beyond the current slump. For a strategic buyer, PayPal represents a chance to accelerate its own digital payments ambitions or acquire a large, established customer base at a steep discount.A large bank, for instance, could leverage PayPal's massive user network and trusted brand to rapidly expand its own digital wallet offerings, bypassing years of slow organic growth. The company's <a href="https://finance.yahoo.com/news/paypal-attracts-takeover-interest-stock-162731815.html">market value of about $38.4 billion</a> is a fraction of its peak, making the purchase price for a controlling stake a bargain relative to its historical premium. This is the classic "distressed asset" play: buy a company with operational problems at a depressed valuation, then fix it.The interest in specific assets, like its branded checkout platform, points to a different strategic motive. A rival payments firm might want to acquire PayPal's high-margin branded business to directly compete with Apple Pay and Google Pay, gaining instant scale and merchant relationships. The platform's recent slowdown is a red flag, but for a buyer with better technology and marketing, it's a problem to solve, not a reason to walk away.The new CEO, Enrique Lores, is now tasked with restoring momentum. His challenge is immense, inheriting a company that has <a href="https://rollingout.com/2026/02/23/paypal-ceo-exit-earnings-miss/">lost market share to rivals</a> and failed to modernize. The recent performance suggests significant operational hurdles remain, from product innovation to competitive pricing. Yet that's exactly why a buyer might be interested. A strategic acquirer doesn't just buy a stock; it buys a team, a platform, and a customer base to retool. The depressed valuation means the risk of failure is lower, while the potential upside from a successful turnaround is high. The setup is a classic event-driven opportunity: a company in distress, with a clear path for a buyer to create value.<h2>Catalysts and Risks: The Path to a Deal</h2><visualization dataurl="https://cdn.ainvest.com/news/visual/visual_components/viz_qsqqjfs9.json"></visualization>The immediate catalyst for a deal is straightforward: will preliminary buyer interest translate into a formal bid? Right now, the process is in its earliest stages, with meetings ongoing and no transaction guaranteed. But the potential upside is clear. A controlling acquisition at the current valuation would offer a buyer a significant premium to the stock's depressed price, providing a powerful incentive to move quickly before the company's strategic reset gains traction.The key risk, however, is that the stock's decline is a symptom of a deeper, structural competitive threat that no buyer can easily fix. PayPal's core problem is a loss of market share to rivals like Apple Pay and Google Pay, a trend exacerbated by its <a href="https://finance.yahoo.com/news/paypal-attracts-takeover-interest-stock-162731815.html">failure to modernize its payments technologies</a>. If the new CEO, Enrique Lores, cannot reverse this erosion of its branded checkout segment-which saw revenue growth slow to just 1%-the fundamental business case for a strategic buyer weakens considerably. A takeover would then be a bet on a management team's ability to solve an entrenched competitive disadvantage, a high-risk proposition.For investors, the path forward is to watch two near-term signals. First, monitor the new CEO's execution plan, due to be implemented as he takes the helm on March 1. Any concrete steps to address the competitive threat and stabilize the business will be critical. Second, watch for stabilization in payment volume growth in the coming quarters. The company's <a href="https://rollingout.com/2026/02/23/paypal-ceo-exit-earnings-miss/">continued slowdown in payment volume</a> is a key pressure point; signs of a rebound would suggest the worst is over. Conversely, another quarter of deceleration would likely intensify pressure for a sale, making the takeover thesis more compelling but also highlighting the severity of the underlying problem.

us_middle_importance

Digital Payment

Fintech

Paypal Holdings

PayPal's Takeover Catalyst: A Distressed Asset or a Strategic Play?

<video src="https://www.youtube.com/embed/HZI2nC2fNlI" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_e2ce04301771867883503.jpeg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/HZI2nC2fNlI&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode22Rule_e2ce04301771867883503.jpeg&quot;}"></video>Home Depot and Lowe’s are set to report earnings this week in what could be a pivotal moment for the home improvement space. Home Depot (HD) reports Tuesday before the open, followed by Lowe’s (LOW) on Wednesday. With both stocks up double digits year-to-date—HD roughly +9% and LOW closer to +13%—investors are clearly positioning for stabilization in housing and consumer spending. The question now is whether results and guidance validate that optimism.Starting with <a href="https://finance.yahoo.com/news/home-depot-lowes-report-earnings-111500798.html" target='__blank'>expectations</a> , Home Depot is projected to report fiscal Q4 revenue of approximately $38.1–$38.3 billion, representing a year-over-year decline of roughly 3.7%–4.0%. Adjusted EPS is expected around $2.51–$2.53, down nearly 20% from the prior year. While revenue pressure reflects continued housing market softness and cautious DIY spending, analysts note that HD rarely misses on the top line and has beaten revenue estimates in three of the past four quarters.Lowe’s, reporting Wednesday, is expected to post revenue of roughly $20.3–$20.4 billion, up nearly 10% year over year, with adjusted EPS around $1.93–$1.95, modestly up about 1%. Lowe’s benefited from a somewhat easier comparison and has shown improving operational discipline, but consensus EPS estimates have drifted slightly lower over the past month, signaling some caution heading into the print. <a href="https://www.zacks.com/commentary/2873571/earnings-whispers-home-depot-hd-poised-for-positive-surprise" target='__blank'>Guidance</a> will likely matter more than the quarter itself. On December 9, Home Depot reaffirmed fiscal 2025 guidance and laid out preliminary fiscal 2026 expectations. The company expects FY26 sales growth of 2.5%–4.5%, with comparable sales projected flat to +2%, and adjusted EPS growth ranging from flat to +4%. In its “market recovery case,” HD sees total sales growth of 5%–6% and mid-to-high single-digit EPS growth if housing activity rebounds more sharply. Management has emphasized prudence in the near term but remains bullish on its longer-term algorithm once housing turnover improves.For Lowe’s, full-year 2025 guidance calls for approximately $86 billion in revenue and adjusted EPS of around $12.25, with comparable sales expected flat for the year. Capex is expected at up to $2.5 billion. Like HD, Lowe’s has leaned heavily into the Pro customer, now about 30% of sales, as DIY demand remains uneven.Several analysts see these earnings as potential validation events rather than downside catalysts. UBS suggests expectations are well managed, with the bar for HD comps around flat and LOW comps in the 1%–2% range. KeyBank’s Pro contractor survey points to stable near-term trends, though pros remain concerned about consumer confidence and are increasingly facing labor shortages tied to immigration enforcement. JPMorgan believes Q4 could represent a cyclical low point, with tax refunds, fading goods inflation, and persistent wage growth supporting improvement in 2026.From a growth perspective, HD and LOW show notable differences. Based on recent data, HD is growing revenue roughly 7.5% year over year versus LOW at 0.6%, though forward revenue growth expectations for both are modest (HD ~3.9% vs. LOW ~2.6%). Over three- and five-year CAGRs, HD has outpaced LOW materially, with stronger historical top-line and EBITDA performance.Valuation also diverges. HD trades at roughly 25–26x forward earnings versus LOW closer to 22–23x. EV/EBITDA multiples are similarly elevated for both (HD ~18x forward vs. LOW ~16x). HD commands a premium given its scale, Pro dominance, and historically stronger execution. However, with EPS growth expected flat to slightly positive for FY26, some argue the stock already discounts a recovery. Lowe’s appears modestly cheaper but has shown more volatile growth metrics over the past several years.Profitability metrics remain solid for both, though HD’s scale advantages are notable. Price-to-cash-flow and price-to-book multiples skew higher for HD, reflecting its market leadership and capital allocation consistency. Meanwhile, LOW’s aggressive share repurchases have historically supported EPS, but margin execution remains a key watch item.Macro remains the swing factor. Mortgage rates have hovered in the low-6% range and are expected to drift lower later in 2026. Even incremental declines in rates could stimulate housing turnover and remodel activity, which would disproportionately benefit Pro-heavy sales. Importantly, President Trump is expected to address housing affordability in his State of the Union speech this week. Any proposals tied to tax incentives, zoning reform, or mortgage relief could act as a near-term catalyst for housing-sensitive equities, including HD and LOW.Tariffs add another layer of complexity. The administration’s move to impose a blanket 15% tariff following the Supreme Court’s ruling introduces renewed uncertainty around input costs. While both retailers have significant scale and supply chain flexibility, tariffs on materials such as lumber, appliances, steel, and imported fixtures could pressure margins if costs are not fully passed through. On the other hand, some tariff backfills have been structured in ways that lower effective rates for certain consumer categories, potentially mitigating inflationary impacts. The near-term risk is not just cost inflation but demand sensitivity—higher prices could further delay large-ticket DIY projects.Key items to watch this week include: comparable sales trends and exit rates; Pro segment momentum; big-ticket discretionary demand; commentary on inventory and margin control; and any updates to FY26 guidance in light of housing and tariff developments. Investors will also listen for management tone—whether executives frame Q4 as a bottoming quarter or remain cautious into spring.Options markets are pricing roughly a 4% move for HD and up to 5% for LOW following earnings. With both stocks having rallied to start the year amid a broader rotation out of tech and into consumer names, expectations may not be low, even if consensus estimates are conservative.Ultimately, this week’s reports could shape the narrative for the entire home improvement space. If HD and LOW demonstrate stabilization in comps and reaffirm or modestly improve guidance, investors may lean into the housing recovery trade. If margins show stress from tariffs or consumer elasticity remains elevated, shares could give back some recent gains.The broader setup suggests a sector at an inflection point. Housing turnover remains depressed, but aging housing stock, pent-up demand, tax stimulus, and potential rate relief offer medium-term support. The question investors must answer is whether that recovery is a 2026 story—or a 2027 one.

Recession-proof Stocks 

The Home Depot

Lowe's Companies

Housing on the Brink? Home Depot and Lowe’s Earnings Could Decide the Next Big Move

The application software sector has been hit hard, with many stocks down roughly <a href="https://finance.yahoo.com/news/jefferies-prefers-4-software-stocks-130955692.html">30–55% year to date</a> as the market grapples with fears of AI disruption. That sharp underperformance stands in stark contrast to the broader software ETF, which has declined about 24%. Against this backdrop, Jefferies has initiated a selective reassessment, taking a fresh look at current levels. The firm's new approach centers on an AI Risk Matrix, which evaluates companies across vectors like customer mix, platform positioning, and data advantages to identify which models are best insulated from the coming waves of AI change.This reset has led to a more cautious stance on several names. Jefferies moved Workday, DocuSign, Monday.com, and Freshworks to Hold, citing persistent risks and weaker sentiment. The message is clear: not all software is created equal in the AI transition. Yet the firm stopped short of writing off the sector entirely. "Software will survive – business IP is embedded inside," analysts noted, emphasizing that the core value of software remains intact.The result is a sharper, more focused framework. Jefferies has identified a select group of companies it believes are best positioned to not just survive but thrive. This includes Intuit, Procore, Atlassian, and Salesforce. The firm's logic is straightforward: in a period of intense scrutiny, growth investors should prioritize companies with durable business models, deep vertical expertise, and a clear path to leveraging AI internally. The reset is about separating the resilient from the vulnerable.<h2>Growth Thesis for the Favored Quartet</h2>Jefferies' selective reassessment has pinpointed four companies whose business models appear best insulated from AI disruption. The firm's analysis centers on durable moats: entrenched customer relationships, deep vertical integration, and platform positioning that create high switching costs. These are the defensible advantages that can fuel sustained growth, even as the sector grapples with uncertainty. For <a href="https://finance.yahoo.com/news/jefferies-prefers-4-software-stocks-130955692.html">Intuit</a>, the moat is built on decades of trust and data. The company's "large user base and data moat" stems from its 80 different AI model variations applied to over 40 years of financial data across roughly 100 million customers. This isn't just a software tool; it's the central nervous system for millions of tax and accounting workflows. The sheer volume and specificity of this historical data create a formidable barrier for any new entrant<backtest-component code="INTU" id="strategy_001" range="3" market="169"></backtest-component>. making Intuit's position as a top large-cap pick a logical conclusion.Procore operates in a similarly locked-in environment. The platform is the system of record for construction projects, where workflows are highly customized and enterprise-wide. This vertical specialization creates a significant moat. As Jefferies notes, the company is an attractive mid-cap, vertical story, and its growth trajectory is tied to the specific, complex needs of a single industry. The difficulty of displacing such a deeply embedded system provides a natural defense against disruption.Atlassian's strength lies in its platform positioning within enterprise IT. The firm sees a direct link between AI's rise and demand for its tools: "more AI-generated code = more need for IT collab." This creates a virtuous cycle where the adoption of AI tools actually increases reliance on Atlassian's collaboration suite. The company is described as the "fastest growing app name with catalysts for 20+% MT growth", a trajectory powered by its deep integration into the workflows of the very teams generating AI content.Finally, Salesforce is viewed as the ultimate system of record for customer relationships. Its "highly customized workflows and large footprint within the enterprise" make it the natural home for AI agent integration. The firm believes Salesforce is "best-positioned among apps vendors to deliver on AI agents" because displacing it would require overhauling a core business function for countless companies. This entrenched position, combined with its CRM dominance, provides a powerful moat that can drive future acceleration.Together, these four companies represent a portfolio of defensible growth. Each leverages a unique combination of data, vertical expertise, platform integration, or workflow entrenchment to build a barrier that AI disruption struggles to breach. For a growth investor, that is the essential starting point.<h2>Catalysts and Execution Risks for Each Name</h2><img src="https://cdn.ainvest.com/aigc/hxcmp/images/compress-qwen_generated_1771853662244.jpg.png" style="max-width:100%;"/>The growth thesis for these four companies is clear, but the path to realizing it hinges on near-term execution. The primary catalyst for all is the same: tangible proof that their AI agent integrations are driving revenue acceleration and margin expansion. Investors need to see the promised synergies materialize in the financials.For <a href="https://finance.yahoo.com/news/jefferies-prefers-4-software-stocks-130955692.html">Intuit</a>, the catalyst is demonstrating that its "80 different AI model variations" are not just a technical showcase but a lever for higher customer engagement and pricing power. The company's "large user base and data moat" is its shield, but the question is whether it can convert that into faster growth. The risk is that AI disruption, while not toppling the platform, could erode its pricing advantage if competitors offer cheaper, equally effective tools.Procore's catalyst is a clear revenue reacceleration as macro conditions ease, directly tied to its vertical expertise. The company's "attractive mid-cap, vertical story" depends on executing on its project pipeline and maintaining its entrenched position in construction. The key risk here is the "further risk of AI disruption" from new entrants that could offer more specialized, AI-native construction tools, challenging its workflow dominance.Atlassian's growth is intrinsically linked to AI adoption. The catalyst is showing that "more AI-generated code = more need for IT collab" translates into sustained, high-margin growth for its collaboration suite. The firm's "fastest growing app name with catalysts for 20+% MT growth" label sets a high bar. The risk is that if AI tools become more autonomous, the need for human collaboration could diminish, undermining its core value proposition.Salesforce's entire AI bet is on its system-of-record status. The catalyst is seeing "success" in its AI agent integrations lead to "overall acceleration," likely through expanded usage and higher attachment rates on its CRM platform. The risk is that if AI agents become powerful enough to handle complex customer interactions independently, they could bypass Salesforce's interface, threatening its central role.Jefferies' framework for navigating this landscape is its AI Risk Matrix, which evaluates companies across vectors like customer mix, platform positioning, data advantages, and pricing models. This is the tool the firm used to identify the resilient quartet and to move others to Hold. For investors, the matrix provides a lens to assess each company's specific vulnerabilities. The constant vigilance required by the "further risk of AI disruption" means watching not just revenue growth, but also how each company's competitive moat holds up against the tide of change.<h2>Valuation and Forward-Looking Implications</h2><visualization dataurl="https://cdn.ainvest.com/news/visual/visual_components/viz_rynii1in.json"></visualization>The sharp underperformance has compressed valuations, but Jefferies sees a sector facing a structural reset. While the broader software ETF has declined about <a href="https://finance.yahoo.com/news/jefferies-prefers-4-software-stocks-130955692.html">24%</a>, many application software stocks have fallen 30–55% year to date. This volatility reflects a market grappling with AI's disruptive potential. Yet Jefferies' analysis suggests the group's forward path is more constrained than many investors hope. The brokerage has revised downward its earnings estimates for the IT sector, citing a structural shift where AI is expected to <a href="https://m.economictimes.com/tech/information-tech/ai-to-redefine-it-business-models-jefferies-flags-structural-risks-and-slower-growth/articleshow/128708032.cms">shrink the share of managed services</a> while boosting consulting and implementation work. This transition could increase cyclicality and add execution risks, leading Jefferies to conclude the sector still offers higher downside risk than upside potential.For a growth investor, the implication is clear: focus on scalability and market penetration within the select group, not the broader sector. Current earnings are secondary to future dominance. The qualitative analysis of durable moats-Intuit's data fortress, Procore's vertical entrenchment, Atlassian's platform link to AI code, and Salesforce's system-of-record status-must now be translated into a forward-looking framework. The key watchpoints are not just revenue growth, but the successful integration of AI agents and the ability to maintain pricing power within their entrenched workflows.The investment thesis hinges on these companies converting their defensible positions into scalable growth. For Intuit, it's about leveraging its 80 different AI model variations and large user base and data moat to drive higher engagement and pricing. For Procore, it's executing on its attractive mid-cap, vertical story as macro conditions ease. Atlassian's growth depends on proving that more AI-generated code = more need for IT collab fuels its high-margin expansion. Salesforce's entire AI bet rests on its highly customized workflows and large footprint enabling successful AI agent integration that leads to acceleration.The bottom line is that the reset has created a bifurcated landscape. The broader sector faces structural headwinds, but within the select quartet, the path to future dominance is defined by execution. Investors should monitor for tangible proof that these companies are not just surviving the AI transition, but using it to deepen their moats and scale their market penetration.

SaaS

Intuit

Procore

Atlassian

Salesforce

Jefferies' Selective Software Picks: A Growth Investor's Guide to Intuit, Procore, Atlassian, and Salesforce

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