Enterprise Software Seizes the AI Baton From the Chipmakers

Dear readers,

Yesterday’s letter left off with Palantir’s stock up 38 percent on the back of a 93 percent revenue jump — a headline number that begged an obvious follow-up question: is that growth actually sticking, or just a one-quarter sugar high? The company’s latest breakdown answers with more evidence than most bulls could have hoped for, and it’s not alone. A rotation that started with chips is now working its way through the software stack, even as equity markets open the week cautiously ahead of Wednesday’s inflation print.

Palantir Shows Its Work

The debate over when AI moves from pilot project to paying customer has been running for two years. Palantir’s numbers suggest the wait is over. U.S. commercial revenue grew 149 percent in the latest quarter — a number impressive on its own, but the real signal is in the depth of adoption. Revenue per customer climbed 76 percent over the past twelve months to $3.5 million, even as the customer count itself expanded to 653 companies. Growth and penetration rising together, rather than one cannibalizing the other, is the pattern institutional investors have been waiting to see. Bank of America responded by reiterating its $255 price target, implying roughly 50 percent more upside from here.

Atlassian delivered a similar message in a different register: shares jumped 35 percent in after-hours trading late last week, a reminder that Palantir isn’t a one-off. Enterprise software companies that can show measurable efficiency gains, not just AI-adjacent buzzwords, are commanding the market’s attention — and increasingly its multiples. The common thread is recurring revenue that compounds rather than resets each quarter, which is exactly the kind of durability investors have been pricing at a premium since the broader AI trade began rotating away from pure infrastructure plays.

Hardware Hasn’t Stopped Printing Money

None of this means the picture-and-shovel trade is over — it’s simply maturing into its next phase. Micron’s latest quarterly numbers were, by any historical standard, extraordinary: revenue jumped 74 percent sequentially to $41.5 billion, with gross margins near 85 percent and adjusted earnings above $25 a share. Those are figures that even boom-cycle memory makers rarely post. Wall Street responded accordingly, with fresh price targets averaging around $1,500.

Nvidia’s Jensen Huang, for his part, used the recent tech pullback to make a public case for buying it, arguing that AI infrastructure buildout remains in its early stages rather than its late innings. Investors who stayed positioned in the hardware layer are currently sitting on margins wide enough to absorb a fair amount of macro noise. And the appetite for physical compute isn’t confined to the usual suspects: Tesla and SpaceX’s planned “Terafab” project in Texas, which would combine chip fabrication with advanced packaging under one roof, is a reminder that demand for raw silicon is spreading well beyond the traditional AI hyperscalers.

Consumer Tech Loses Its Shine

Should investors sell immediately? Or is it worth buying Palantir?

The contrast with consumer hardware is getting harder to ignore. Jefferies downgraded Apple to “Underperform” and cut its price target to $263.66, pointing to production problems with the upcoming iPhone 18 as the central concern. It’s a useful reminder that “AI winner” and “tech giant” are no longer synonymous.

For portfolio construction, that distinction matters. Investors who track the broad indices passively are carrying meaningful concentration risk in consumer-tech names that are now stumbling, even as enterprise software and infrastructure names quietly do the heavy lifting. The market is currently rewarding active stock-picking that shifts capital toward businesses growing independently of household spending patterns — precisely the kind of names that dominated this letter’s earlier sections.

Crypto: Institutional Inflows Meet Insider Selling

Digital assets are showing their own version of this bifurcation. Bitcoin has held above $65,000, supported by sustained ETF demand — U.S. spot funds pulled in roughly $854 million last week alone. But the flows aren’t uniformly one-directional. MicroStrategy, long the most visible corporate bitcoin buyer, sold 1,690 bitcoin for nearly $109 million last week and separately offloaded more than $650 million of its own stock.

That split — institutional money arriving through regulated vehicles while a marquee corporate holder trims its position — looks less like a warning sign and more like a market growing up. ETF inflows are building a real floor under the price, even as profit-taking from large holders signals that the era of indiscriminate rallying is behind us. For crypto-focused investors, the practical takeaway is to treat volatility spikes as rebalancing opportunities rather than reasons to chase or panic.

The Week Ahead

Wednesday’s inflation data will set the tone for rate expectations, and tensions around the Strait of Hormuz have already pushed oil above $84 a barrel — both are the kind of macro variables that can jolt sentiment in either direction. But the more durable story is the one running underneath: capital is moving away from pure infrastructure exposure and toward companies proving they can convert AI spending into recurring, scalable revenue. That shift, not the next CPI print, is what should be guiding portfolio decisions this month.

Best regards,
The StocksToday.com Editorial