Two different takes on the same market … which one is correct?… what earnings are actually doing… the one variable to watch to protect your portfolio… one of Louis Navellier’s top stocks today
Two articles landed this week, making different cases about the same market. One said we’re in a bubble. The other said we’re probably earlier in the cycle than later.
Both are worth taking seriously – but which one is right?
On Monday, Fast Company made the bear case, comparing today to the dot-com bubble, citing three pieces of evidence:
- The S&P 500 closed May at a record high, but only 20 of those 500 companies hit their own all-time highs.
- Concentration in a handful of mega-cap names.
- AI startups raising billions ahead of IPOs. Echoes of 1999.
But then yesterday, Goldman Sachs CEO David Solomon sat down with CNBC and said something a bit different…
Asked whether markets could absorb a string of massive equity offerings from OpenAI, Anthropic, and SpaceX, Solomon said that there’s plenty of liquidity, greed has overtaken fear, and – importantly:
Exuberance can go on for big periods of time…
There’s a good chance that we’re earlier in the cycle than later.
He also noted that gains generated by AI companies could create a self-reinforcing cycle as employees and investors recycle profits into taxes and new ventures.
Same market conditions. Different conclusions.
So, which framework should we use as we try to position our portfolios wisely?
The bears aren’t wrong to be nervous
Billionaire Ray Dalio, founder of the world’s largest hedge fund, Bridgewater, has called the AI boom “the early stages of a bubble,” comparing current euphoria levels to roughly 80% of what preceded the dot-com crash.
This is not an ignorable permabear on Reddit. He’s one of the most rigorous macro thinkers alive.
The breadth concern Fast Company raised is also legitimate. When a handful of stocks are doing most of the heavy lifting, it’s a fair question whether the rally is built on a broad or narrow foundation.
Plus, there are real macro headwinds on the calendar right now.
In yesterday’s issue of Accelerated Profits, legendary investor Louis Navellier flagged four potential volatility triggers in the next 15 days alone:
- The Consumer Price Index on June 10,
- The Producer Price Index on June 11,
- The first FOMC meeting under new Fed Chair Kevin Warsh on June 16-17,
- And a quadruple witching day on June 18 (a quarterly stock market event when four different types of financial derivatives expire simultaneously, leading to a massive surge in trading volume).
Louis isn’t dismissing the risk of outsized volatility in the wake of any of these events.
So, there are plenty of valid reasons to be cautious today. Anyone pretending otherwise isn’t being straight with you.
But as we’ve been highlighting in the Digest recently, the bears are focusing too much on just one direction
Backwards.
I’ve been stressing this because it’s a critical awareness that investors must hold.
The Fast Company article compared today’s market to the dot-com mania. For perspective, the technology sector’s aggregate forward P/E was 50 back then. Today it’s roughly 30.
Richly priced? Yes. Nosebleed? No.
More importantly, the companies driving the dot-com bubble were, in aggregate, destroying capital. Cisco (CSCO) traded at 200 times earnings. Pets.com had no earnings. The entire thesis rested on future revenue from an internet economy that, while real, was years away from generating cash.
The companies driving today’s AI rally – Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN) and Meta (META) – are among the most profitable in corporate history. Nvidia alone reported net income exceeding $120 billion in fiscal 2026. Microsoft, Alphabet, Amazon, and Meta generated a combined $350 billion in free cash flow in their most recent fiscal years.
Can a market throw off record profitability and be a classic bubble at the same time? Those two things are definitionally at odds.
Which brings us to an important question…
What are earnings telling us?
The most recent FactSet Earnings Insight report, published last Friday, provides the answer – and it’s striking.
Q1 2026 S&P 500 earnings growth came in at 28.6%. That’s the highest earnings growth rate reported by the index since Q4 2021, and the sixth consecutive quarter of double-digit growth.
Plus, at the start of the quarter, analysts had projected 13.1% growth. Reality came in more than double that estimate.
It gets better…
In a typical quarter, analysts reduce earnings estimates during the first two months of the following quarter. The historical average reduction over the past 20 years is 3.2%. This time around, analysts increased Q2 estimates by 2.5% – the largest such upward revision in the first two months of a quarter since Q3 2021.
Finally, the S&P 500’s blended net profit margin for Q1 2026 is 14.8%. If that holds, it will be the highest net profit margin FactSet has recorded since it began tracking this metric in 2009.
The previous record was 13.2% – set just last quarter.
It’s no wonder why Louis just told his Accelerated Profits subscribers:
We remain in one of the best earnings environments of our lifetime.
FactSet currently estimates the S&P 500 will achieve 21.6% average earnings growth and 12% average sales growth in the second quarter.
But it’s likely S&P 500 companies will report even higher earnings growth for the second quarter.
Bubbles often feature loads of companies burning cash rather than posting record profits. The data and the narrative are pointing in different directions.
If the earnings picture is this strong, why do analysts keep underestimating it?
One big reason: the spending commitments behind these earnings are larger than most models account for.
Google, Amazon, Microsoft, and Meta collectively committed $725 billion in capital expenditures for 2026 alone – up 77% from last year’s already historic levels. That money flows directly into the revenues of every company supplying the buildout: the chip makers, the data center operators, the power infrastructure providers, the networking equipment companies.
And that’s just 2026…
On Nvidia’s most recent earnings call, CEO Jensen Huang projected that global AI infrastructure spending will reach $3 to $4 trillion annually by 2030. Wall Street’s current consensus model has hyperscaler capex hitting $1.03 trillion in 2028.
The gap between those two numbers – consensus versus Huang’s reality – is precisely why earnings keep arriving well above what analysts project. The models are anchored to old assumptions. The spending is not.
The core question that provides clarity
Bubble warnings. Geopolitical risk. A Fed that’s cornered. Quadruple witching. Consumer confidence wobbling. Stagflation whispers.
It’s a lot.
Louis has spent decades watching investors get shaken out of winning positions by exactly this kind of noise.
But over those same decades, to help investors, he’s distilled markets down to a single organizing principle – one so reliable, so consistently validated by history, that he gave it a name.
Here’s Louis’ “Iron Law of the Stock ÃÛÌÒ´«Ã½” in his own words:
Stock price trends can diverge from earnings trends for a while, but over the long term, if a company grows and grows the amount of cash it takes in, its share price is sure to head higher.
That’s it – the whole framework.
Notice what the Iron Law does not require…
It doesn’t ask you to resolve the bubble debate. Or know whether Dalio or Solomon is right. Or predict what Fed Chair Warsh will say on June 17. Or how the market will react to the CPI print on June 10.
It asks you one question – though it’s really a two-parter: are the companies you own growing their earnings, and is today’s price reasonable relative to where those earnings are going?
That second part matters. A growing company trading at an absurd multiple relative to its future earnings is a different animal from one whose forward valuation still makes sense.
This is why trailing P/E – which looks backward – can be so misleading right now. The companies in the direct path of the AI buildout aren’t just growing earnings today. Analysts are raising their forward estimates at the fastest pace in five years.
And here’s another thing worth remembering…
The market isn’t one big monolith. It’s thousands of individual companies, each with its own earnings story.
Some AI-adjacent stocks may well be overpriced relative to their fundamentals. Others aren’t – our job is to know which is which.
Of course, that’s exactly why the fears on the table right now – Iran, stagflation, a paralyzed Fed, stretched valuations in certain corners of the market – are worth taking seriously at the individual stock level, but are not a reason to abandon positions in companies with accelerating earnings and forward valuations that the data supports.
So, let’s be clear…
Volatility is coming – Louis said so himself. But volatility is not the same as permanent loss.
Especially not for companies posting record profit margins, blowing past earnings estimates by the largest margin in years, and sitting in the direct path of the most consequential infrastructure buildout in the history of technology.
If you’re nervous today, listen to your fears – but frame them in facts.
What the Iron Law looks like in practice today
If you want a live example of this framework in action, look at Super Micro Computer, Inc. (SMCI), one of Louis’ current top picks in Accelerated Profits.
Super Micro builds the high-density servers that power AI data centers. It’s exactly the kind of company the Iron Law was built for.
Here’s Louis:
For its third quarter in fiscal year 2026, Super Micro Computer achieved 122.6% year-over-year sales growth and 171% year-over-year earnings growth.
Adjusted earnings per share beat estimates by 35.5%.
Analysts have increased fourth-quarter earnings estimates by nearly 27% in the past month alone, now calling for 73.2% year-over-year earnings growth.
That’s not a story about a speculative startup chasing an AI narrative. That’s the Iron Law operating in real time – a company in the direct path of $725 billion in annual spending.
Louis has SMCI rated a buy below $49. As I write on Wednesday, it trades just under $47.
The bottom line
The bubble debate will keep making headlines. Dalio will keep sounding the alarm. Fast Company will keep finding patterns that rhyme with 1999.
None of that is without merit – but none of it changes what earnings are doing right now.
Stay focused on the right question, own the right companies, and let the Iron Law do what it has always done.
By the way, Louis is working on something big today – as always, anchored in his earnings-centered market approach. More on that later this week.
Before we sign off…
Today’s the last day to catch with market veterans Jonathan Rose and Marc Chaikin.
They’ve spent the last several months combining two of the most powerful “smart money” indicators into a single “Convergence Trigger.”
This combined trigger, back-tested across nearly 200 real trades, produced an 81% win rate and 147% average gain – and filtered out two of every three losing trades.
Today’s , so if you’ve been meaning to watch, this is your last call.
Have a good evening,
Jeff Remsburg
(Disclaimer: I own MSFT, GOOGL, and AMZN)
