Welcome to Staten News — where beating your earnings estimate this week got you a 13% haircut.
📉 Good Numbers Stopped Working
Arm did what it was supposed to do. Fiscal second-quarter revenue came in at $1.44 billion and adjusted earnings at $0.52 a share, both above consensus. Licensing revenue jumped 50%. The company guided next quarter to about $1.54 billion, a hair above the $1.53 billion analysts wanted.
The stock fell 13.08% to $166.72.
Palantir’s version was even stranger. Revenue hit $2.31 billion, up 96%. It raised its full-year revenue guide to $8.53 billion. Then it fell about 10% on Thursday, because bookings grew just 6% to $2.92 billion and the stock still trades around 33.5 times forward sales on 2027 estimates.
Translation: when you’re priced for perfection, a 96% quarter is the minimum.
Qualcomm at least gave people a real reason. Handset revenue dropped 26%, higher component costs are squeezing the phone chip business, and the profit forecast underwhelmed. Shares lost 9.49%.
🔌 The Fight Moved to the Power Line
We wrote Wednesday that data centers were on the ballot. By Thursday the deal news had started looking a lot less friendly too.
Microsoft will not exercise an option to more than double its agreement with AI cloud provider Nscale at a Texas data center, Reuters reported, citing a person familiar with the matter. The Financial Times broke it first. That extension would have been worth tens of billions of dollars to Nscale.
Be careful with the easy story here. The source told Reuters the decision was made months ago, before Nscale filed for its IPO in September, and the existing Texas contract isn’t affected. Nscale’s roughly $103 billion in total contract value doesn’t change either. This wasn’t Microsoft reacting to Tuesday’s election.
But the timing still landed badly, because Texas just elected a governor who has pledged to halt new projects until the legislature writes rules for the industry. Microsoft also walked away from anchoring Nscale’s Loughton site in England after power connection delays pushed supply into the 2030s. And Oracle’s $165 billion New Mexico complex now faces a possible delay.
That’s the shift. A year of AI coverage treated chips as the bottleneck. This week the bottleneck looked like a permit.
💾 Memory Took It Worst
Sandisk fell 22.26% to $806.43. Micron dropped 17.46% to $656.39, its worst day since March 2020. Western Digital lost 17.35%. The Philadelphia Semiconductor Index gave up 12.3%.
Micron had its own problem on top of the macro one. Bloomberg reported the company paused a $4.5 billion Taiwan plant over a labor dispute. In a normal week, less future supply might help memory pricing. Nobody was trading a normal week.
♟️ Who Gets Hurt, Who Gets Paid
The most exposed names are the ones selling capacity that still has to get built. IREN, Applied Digital and Nebius each fell more than 14% on Thursday. Their pitch depends on power, permits and customers all showing up on schedule.
On the other side, anybody who already has energized capacity in a friendly state just got a lot more interesting. Scarcity pays whoever already owns the scarce thing. That’s our read, not a promise, and it only holds if demand for compute keeps running hot.
Nscale is the name to watch. It has an IPO filing out and reported talks to sell Anthropic about $45 billion of compute, per Reuters. Going public into this tape would be a real test of what the market will pay for contracted AI capacity.
The Street can’t agree on any of this either. Goldman has a Sell rating on Arm with a $160 target. Barclays cut its target to $325. Same company, same quarter, and one number is double the other.
This is the week AI stopped being only a demand story. Arm was trading around $178.58 in premarket on Friday, up about 7%, so the bounce has already started. It won’t answer who gets to plug in.
Sources: Reuters via Euronext, Yahoo Finance, TheStreet Pro, Investing.com on Arm
— The Bandicoots 🔌📉