This week’s impressive earnings results showed that the AI buildout is not a zero-sum game: both hardware and software stocks can win. The tech-heavy Nasdaq Composite and the S & P 500 gained 0.9% and 0.5%, respectively, while the blue-chip Dow Jones Industrial Average added 0.5%, marking its first winning week in three. Much of the gains came Thursday, when the ripple effects of Nvidia’s stellar earnings and forward guidance helped lift all three averages to their best days since Aug. 4. Stocks were little changed on Friday following Fed Chairman Kevin Warsh’s Jackson Hole speech, in which he said that recent inflation data has not eased his concerns about underlying price pressures, keeping the possibility of another rate hike on the table. Traders raised the odds of a September hike to 55%, up from about 35% a day earlier, according to the CME FedWatch tool . Here’s a closer look at three developments that drove our portfolio this week. Nvidia puts AI demand worries to rest The AI chip leader delivered better-than-expected fiscal second-quarter results on Wednesday, marking its fourth straight quarter of accelerating revenue growth, and issued a surprisingly strong outlook for next fiscal year . The results reinforced confidence in AI demand, lifting the broader trade Thursday. Nvidia shares ended the week up 1%. We also learned on the earnings call that Amazon will purchase an additional 2 million Nvidia GPUs in 2027 and 2028, despite developing its own AI chips. The commitment supports Nvidia’s argument that customers are generating enough returns on its AI infrastructure to justify continued spending. CEO Jensen Huang said that “return on investment capital is now less than a year.” As Jim put it, “The profits are here now , customers are using them, and they’re making a killing.” The willingness to spend on Nvidia’s products has broadened beyond the hyperscalers . Nvidia finance chief Colette Kress said the company’s growth in the current quarter will primarily be driven by non-hyperscaler customers, which includes so-called neoclouds like CoreWeave and Nebius , as well as enterprises. We came away even more confident in Nvidia. Demand is accelerating, customers are seeing tangible returns, and supply remains the constraint. We raised our price target to $280 from $260. AI as software tailwind Salesforce delivered better-than-expected revenue and an upbeat outlook Wednesday, offering fresh evidence that AI is helping rather than cannibalizing its business. CEO Marc Benioff called fears of a “SaaSpocalypse” ” nonsense, ” noting that nine of the 10 leading AI companies use Salesforce products and that their spending is up 435% year over year. Salesforce also unveiled Claudeforce , which allows salespeople to use Anthropic’s Claude to tap customer data stored in Salesforce and perform tasks such as composing emails and updating records. CrowdStrike offered another example of AI becoming a tailwind rather than a threat. On Wednesday, the…
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