Strong tech earnings calm AI fears as markets search for stability
Speakers
Summary
- Tech Earnings & AI Anxiety: NVIDIA's 75% data center growth has temporarily calmed AI fears, but "anxiety" remains in the software sector (Salesforce/Workday).
- Sector Rotation: A clear rotation is occurring out of pure momentum tech into "Infrastructure plays," specifically Utilities and Energy, which are breaking out.
- The "Floor" Thesis: Technical price action in software stocks (bad news, stock closes higher) suggests the sector may have finally "puked out" the negativity and found a bottom.
- Geopolitical Deal-Breakers: In M&A and capital raising, any dependency on China is now a "material" deal-killer due to the US-China schism; domestic infrastructure is the beneficiary.
Trade Ideas
While NVIDIA is "hitting it on all cylinders," Woods notes "there's no momentum here" and the stock is no longer lifting the market as it used to. Great earnings are no longer sufficient to drive price expansion; the stock needs to undergo a period of stabilization/consolidation before it becomes a leader again. WATCH. Wait for the stock to prove it can stabilize before aggressive entry. Broader semi-conductor cyclical downturn or cap-ex fatigue.
Workday (WDAY) had a bad quarter and gapped lower, but "closed higher." Salesforce (CRM) guidance was poor, but price action is "finding a floor." When stocks stop going down on bad news (gap down + close green), it indicates seller exhaustion ("we finally puked this out"). This technical signal suggests the bottom is in. LONG. Tactical entry based on technical capitulation. Further guidance cuts or macro slowdown affecting enterprise software spend.
There is a "strong need" for Agentic AI and platform providers to leverage relationships with traditional software companies. The market underestimates the "dependency" AI models have on traditional software for training and deployment. Legacy software isn't dead; it's the necessary infrastructure for the next phase of AI. LONG. Fundamental value play on the "winners" in the space. Disruption by native AI apps that bypass legacy systems entirely.
"That's where the puck is going." Energy is a "safe place to be" with conflict risks involving Iran and oil prices near highs. In an election year with geopolitical instability, capital is rotating into hard assets and cash-flow-rich energy majors (Exxon, Chevron, Valero) as a hedge. LONG. Momentum breakout in the sector. De-escalation in the Middle East leading to a drop in oil risk premiums.
Jay Woods
Chief Global Strategist at Freedom Capital Markets
"The utility sector [is] breaking out." The AI trade is shifting from chips to "Infrastructure plays." Domestic spending on data centers and chips requires massive power, directly benefiting utilities. LONG. Follow the rotation into physical infrastructure. Rising interest rates (utilities are bond proxies) or regulatory caps on pricing.
Eric Mandell
Securities / Investment Banking
In current deal-making, "if it touches China, the likelihood of interest goes down materially." Boards are conducting deep diligence to ensure zero dependency on China. This capital starvation will stifle growth and exit opportunities for companies with Chinese exposure. AVOID. The geopolitical risk premium is effectively infinite for M&A right now. Thaw in US-China relations (unlikely in current context).
Up Next
This CNBC video, published February 26, 2026, features Jay Woods, Eric Mandell discussing NVDA, WDAY, CRM, IGV, XLE, XOM, CVX, VLO, XLU, KWEB. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Jay Woods, Eric Mandell · Tickers: NVDA, WDAY, CRM, IGV, XLE, XOM, CVX, VLO, XLU, KWEB