No qualifying author-owned investment thesis was confirmed in this post.
Sector observation and questions without a clear actionable directional thesis on a specific asset.
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Trying to make sense of todays action because honestly its confusing me.
Cisco reported last night:
\- Revenue: $15.3B (beat by $200M)
\- EPS: $1.04 (beat by $0.02)
\- Full year guidance raised
\- AI infrastructure orders hit $2.1B
\- Product orders up 18% YoY
Stock down 11% today. Worst day in years.
Vertiv reported yesterday:
\- Revenue: $2.88B (met expectations)
\- EPS: $1.36 (beat by 5%)
\- Orders up 252% YoY
\- Backlog: $15 billion
\- 2026 EPS guidance $6.02 (street expected $5.33)
Stock up 24%. All time highs.
Both companies are in the AI infrastructure space. Both beat. Both raised guidance. One got destroyed, one mooned.
The answer seems to be margins.
Cisco guided gross margins at 65-66%. Analysts wanted closer to 68%. Memory chip prices are crushing them and they cant pass the costs through fast enough. CEO basically said "we raised prices but its not enough."
Vertiv meanwhile is expanding margins while demand explodes. They make cooling systems and power infrastructure for data centers. The stuff you physically cannot run AI without. And their customers are paying up.
This feels like the market telling us something bigger. Software stocks have been getting destroyed all year — the SaaSpocalypse as some are calling it. Oracle down 50% since October. ServiceNow down 40%. Palantir down 23% YTD despite beating earnings 13 quarters in a row.
But hardware infrastructure plays are ripping. Vertiv up 35% YTD. Eaton and GE Vernova catching bids too.
Is this the new playbook? Sell the software, buy the physical infrastructure? Or is this just a temporary rotation thats about to snap back?
Curious what the value crowd thinks. Are any of these software names actually cheap enough to buy now? Is Vertiv too expensive at 50x earnings?
Whats your read?