Q4 Stock Picking: Where Scarcity Is Priced In, and Where It Isn’t

Dear readers,

Friday’s edition showed how selective spending has become, with Nike punished for its guidance and the jobs report offering little comfort. The new quarter puts the same question to investors themselves: which stocks still offer something for the price, and which already charge for everything?

The market’s surface looks calm. The S&P 500 sits only a little over one percent below its high, but a handful of stocks are carrying it. One analysis finds that 78 percent of S&P 500 constituents are in correction territory, with the median stock 16 percent below its 52-week high. For Q4, selection matters more than direction.

Micron: Record Results, Falling Share Price

Micron lifted fiscal 2026 revenue to $133 billion. Fourth-quarter revenue reached $54.23 billion, up 379 percent. Adjusted earnings per share came in at $33.42, against a consensus of $31.61. The company is targeting roughly $61.5 billion in revenue for the current quarter. More than 75 percent of 2027 production is already committed, and CEO Sanjay Mehrotra expects demand to exceed supply through 2028.

Yet the stock fell 2.3 percent on Friday and sits about 13.5 percent below its June high. That gap is the opportunity, and the analysts disagree about it.

Bank of America is raising its fiscal 2027 revenue estimate to $275.4 billion and reiterating a $1,550 price target. Morningstar is cutting its fair value from $850 to $700, because supply could double by 2028.

Tesla offers a telling data point. Elon Musk is cutting the memory in the AI5 chip by a third, to 96 gigabytes, to secure enough volume. Western Digital and Seagate show how jumpy the sector is.

Both fell about 10 percent on Friday after Toshiba announced an expansion of its hard-disk capacity for AI data centers. Toshiba plans to invest about 60 billion yen and to lift its market share over the medium term from a little over 10 percent to 30 percent.

The key question is whether scarcity through 2028 is already priced in. At Micron, a drop despite record results points more to skepticism than to euphoria. At Western Digital, whose quarterly guidance implies a little over $4 billion in revenue and $4.00 in adjusted earnings per share, the reaction to a statement of intent with years of lead time looks clearly overdone.

AMD and Intel: Pricing Power Cuts Both Ways

AMD hit a record high on Friday with a 2.7 percent gain and is up a good 200 percent in 2026. TSMC is passing on wafer price increases of 5 to 10 percent, and AMD plans to raise prices for AI accelerators, graphics chips and chipsets by about 10 percent in the fourth quarter. Intel follows on Monday, October 5, with desktop and laptop processors. Both can pass on costs because supply is tight.

AMD also announced the acquisition of AI startup World Labs for $8.2 billion in its own shares. HPE, a customer for AMD’s Helios rack architecture, reported a $1.2 billion order from Vultr. HPE shares rose 7.36 percent on Friday to a new high of $69.33.

Higher prices support the chip designers’ margins. They also make PCs and AI servers more expensive, and Counterpoint expects smartphone shipments to fall 2.1 percent next year. After a 43 percent gain in 30 days, AMD has little cushion if buyers hesitate. Anyone who wants exposure should stagger purchases rather than add at the record high.

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

Akamai and Okta: Two Ways to Value a Software Stock

Okta has tripled since its April 52-week low of $62.66 and closed Friday at $211.49. Revenue is growing only 11 percent, while the forward P/E has jumped from about 18 to more than 50. The raised fiscal 2027 guidance of $3.90 to $3.94 in adjusted earnings per share supports the rise, but leaves little room for further valuation optimism.

Akamai is the counterpart. The Nasdaq-listed stock trades at about 16 times adjusted forward earnings, while Cloudflare trades at 279 times. Anthropic has signed a seven-year contract worth $11.6 billion, about $1.66 billion a year and more than a third of expected 2026 revenue.

Management warns of short-term margin pressure: adjusted earnings per share recently fell 8 percent, and the operating margin fell 5 percentage points to 25 percent.

The risk is execution in building out AI compute capacity, and the price for that risk is low. With Okta, the investor pays up front for the recovery. With Akamai, a major contract comes almost for free.

Crypto: Tight Supply, Leverage-Driven Trading

Bitcoin trades at about $85,000 after briefly jumping above $87,000. That is well above this year’s July low of $57,721 but far below the October 2025 record of $126,198. Bitcoin balances on major exchanges have fallen to about 2.68 million coins, the lowest since 2023. US spot ETFs took in $134.4 million in the first two trading days of October, and Citigroup is raising its twelve-month target from $82,000 to $113,000.

Derivatives volume recently ran at more than eight times spot trading, which shows how strongly leverage is driving the market. The SEC has reinforced the picture by clearing six triple-leveraged Volatility Shares products for Bitcoin, Ether and commodities on Cboe. Trading has not yet started because registration is still pending. Rising prices are meeting additional leverage.

The bigger single-stock risk lies with Coinbase. An association of community banks is suing the OCC for granting national trust bank charters to crypto firms. Coinbase received its charter in April, Circle in July. Coinbase shares lost 3.5 percent on Friday and are down about 18 percent in 2026. The case will determine whether crypto firms gain a lasting foothold in the banking system. Bitcoin itself benefits more from tight supply.

Outlook

The coming weeks will test the quarter’s rally. Intel’s price increase starts on Monday. US inflation data follow on October 14, and corporate buybacks of about $1.3 trillion are due to restart after October 15. The Fed meets on October 28, with the market betting on a rate pause. Politically, the upcoming midterm elections remain a factor.

The Takeaway

Opportunities lie where scarcity and valuation are not moving in lockstep. Micron and Akamai fit that description, while Okta and AMD at its record high ask buyers to pay for the good news up front. Don’t blindly bet on laggards, and don’t chase heavily run-up favorites.

I hope you enjoy the rest of your weekend.

Best regards,
The StocksToday.com Editorial