August 2, 2026, Issue 32

Welcome to the Dads Team!

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Watch out for That Roomba

In the latest effort to keep us safe and secure the US government has banned all robots and most robot parts coming from China. The Trump administration cited privacy concerns related to the technology collecting sensitive data in homes. Surely the Chinese Communist Party is interested to know how messy our homes are, how many times cats ride on top of them, and how much dog hair has accumulated under our sofas. I don’t know about you, but I certainly feel much safer already.

The Importance of Stock Picking

This past week gave us a vivid reminder of the importance of earnings in stock prices and stock picks. Even when it comes to largest of tech companies, the reaction to earnings and statements that accompany the announcements can really determine the direction of trades. Let’s look at 4 of the biggest.
MSFT – Microsoft stock for the better part of the last year had moved in a very tight trading range, providing shareholders with almost no return. Being part of the software world that investors soured on as they assumed AI would eliminate the need for it did not help. Plus, the investing community could not figure out or did not like the AI story that MSFT was telling. Well, guess what? Last week, all of that became crystal clear. And it turns out the people running the company are not as dumb as everyone thought. Azure cloud revenue grew by 43%, which beat expectations. But for me, the key result was that Copilot subscriptions surpassed 30 million paid seats. Each seat costs on average $22. This represents $660M of annual recurring revenue. This is the clearest sign yet that spending on AI is paying off, at least for MSFT. Shares rose 15% on the news.
AMZN – Amazon’s results were stellar, and they beat on both top and bottom-line expectations, with cloud revenue up a staggering 37% at $42.2B. With that they also announced that they will spend more than $220B for the year related to AI and data centers. Similar to MSFT, while the market is growing wary of all the spending, AMZN showed how the investments are starting to pay off. The shares also surged 15%.
META – The Facebook/Instagram parent landed at the other end of the spectrum. Revenue grew an impressive 28% to $60.8B. However, operating expenses skyrocketed 55% to $42B, including $1.18B in severance fees, $2.4B in legal fees, and of course, massively higher infrastructure costs. The result was a profit of $15.85B or $6.18 per share. Analysts were expecting over $7 per share. On top of that, capital expenditures reached $31.1B for the quarter related to (you guessed it) AI and data centers. Free cash-flow fell an astounding 91% to just $784M. This result coupled with the announcement of over $130B to be spent for the full year and a Q3 revenue guide that also fell short caused the shares to fall about 10%.
AAPL – Perhaps the most surprising news came out of our favorite purveyor of smart phones and computers. Revenue came in at a record breaking $109.4B for the quarter. Both iPhone and computer revenue beat expectations. Where things get a little dicey is with forward guidance. Next quarter’s revenue was projected to grow at 9-11% which missed Wall Street expectations. Margins will retreat to about 47%, which also spooked the market. Shares fell about 10%.
Bottom Line – All of these companies are spending their money as fast as it is coming in on AI infrastructure. The numbers are certainly staggering. But the market is rewarding the ones who show what the future profitability looks like. I would hold on to ALL of these stocks, while potentially adding to the current quarter’s losers. This may be an especially interesting time to jump into Apple if you don’t have any. The near future holds increased prices on all devices, a leasing program on phones, and I still hold out hope for foldable units, which will fly off the shelves, even at ungodly prices.

Who is Receiving the Massive Spend?

With all of these companies spending like crazy and no slowdown in sight, we have to ask where the money is being spent. Companies that provide the chips, memory, energy, and physically build the data centers are on the receiving end of most of these billions of dollars.
We continue to like Nvidia, whose shares have been languishing around $200 for months. The upcoming results should blow the doors off, even with competition from Intel and AMD coming. I think this is a good spot to start a position. Caterpillar has more than doubled in the last year on the sale of the heavy equipment to build data centers. This one looks expensive, so let’s keep it on a watchlist. On the energy side I really like Erock Inc. (EROC). This is a smaller company that is backlogged through 2027. They recently came public to raise money to fund growth. They sell and maintain power systems using their proprietary natural gas systems. These systems are required more and more in the data center buildout. A company like Generac that provides similar power solutions has doubled already in 2026. I believe this is the time to get into EROC while it’s still in the $10 range. Earnings will be out on August 11th, and I think they will be fantastic.
Finally, Micron (MU) is another company that is growing revenue at an unprecedented pace as companies require memory in droves to complete their AI ambitions. Not only are sales exploding, but the margins also last quarter were over 80%. The stock has somehow fallen about 50% since those results were announced. We have been buying shares all the way down and continue to believe that this stock is a coiled spring ready to pop. This is a good entry point for those not yet in MU.

Thought of The Day

Behind every successful person is a substantial amount of coffee. And with the news this week that 3-5 cups a day may actually be good for you, we no longer have worry about our 2-3 cup er day habit. At the same time, while they may be good for you in some sense, we look forward to an expanding audience for late-night shows as people begin to ramp up to that 5 cup maximum.
Johnny Carson, how we miss you!