What you Need to Know for May 28

Welcome back!

Micron and SK Hynix both hit $1T+ valuations this past week as chip maker stocks have been on an absolute tear. Every AI beneficiary has been rallying dramatically, while in Software we’ve seen a tale of two cities as the market responded to recent earnings announcements from ServiceNow, Salesforce, and Zscaler quite differently. More on that below, but bifurcation in Software is just getting started folks.

One of the topical things I’m seeing recently is anecdotes of companies having to pull back on AI spend because their compute costs are getting crazy. Uber is an example. From a bearish perspective, that would mean that “replacing humans with AI” isn’t as cost-effective as some may think. I would urge caution in viewing this as bearish for AI. To me this is clear that some organizations lack attribution re: the positive outcome of AI, are early innings in its applications (as opposed to late innings, we’re not going to use it at all talk, that’s obviously not happening here), and are ignoring the fact that increased token usage is happening because more use case and productivity findings are playing out, resulting in engineers and teams ramping up usage dramatically. If a CEO or executive actually said “We’re going to pull back on AI usage”, - I would generally be bearish the company, as opposed to bearish Anthropic or OpenAI. I expect this narrative is going to pick up steam, but the actual reality for many people leveraging AI professionally is that it turbocharges what they’re able to do in a given week and is on pace to continue improving at an exponential clip. If you give tokens to the wrong people, you’re going to wonder where the ROI is. If you give them to the right people, it will never be in doubt. That’s my AI rant for the day.

Btw, with Intern season coming up, I put out an advice for Interns post here and I’d also recommend our Banking Playbook; a 248 page deck for those recruiting for Investment Banking - sign up for free here 

Let’s get into it.

Earnings Corner 💸 

• Autozone $AZO ( ▼ 2.34% ) revenue slightly missed at $4.84B while EPS beat at $38.07 vs. $36.22. Revenue was hurt by cooler weather late in the quarter, which weakened demand for heat related categories like A/C and battery parts, while international same store sales growth also slowed. Margins benefited from strong domestic commercial sales, better cost control, and operating leverage, though LIFO inventory accounting charges pressured gross margin. AutoZone also continued expanding hub and mega hub locations to improve parts availability and delivery speed, while management flagged ongoing inflation, energy cost, and supply chain concerns tied to the Iran conflict.

• Marvell $MRVL ( ▼ 4.59% ) top and bottom line beat with revenue at $2.42B, as hyperscalers and cloud companies including Amazon, Microsoft, Meta, and Google continued ramping AI infrastructure spending, driving strong demand for Marvell’s custom AI chips, optical networking products, and data center connectivity solutions used to build larger AI clusters and cloud capacity for generative AI workloads. Management also highlighted accelerating adoption of custom silicon and AI networking products as AI data center buildouts continue expanding.

• Salesforce $CRM ( ▼ 0.88% ) top and bottom line beat with revenue at $11.1B and EPS at $3.88 vs. $3.12. Revenue growth was driven by demand for Salesforce’s cloud software platform and rapid adoption of AI products like Agentforce as companies increasingly used AI tools to automate sales, customer service, and workflow tasks. Margins and profitability improved from higher-margin AI and subscription revenue alongside continued cost discipline, while Agentforce annualized revenue more than tripled to $1.2B. However, softer remaining performance obligations and lighter guidance raised concerns that future software growth may be slower than hoped.

• Snowflake $SNOW ( ▼ 1.32% ) revenue beat at $1.39B and EPS beat at $0.39 vs. $0.32. Results were driven by strong enterprise AI demand as companies increasingly used Snowflake’s platform to store, manage, and run AI workloads, boosting the number of customers spending over $1M annually by 29%, alongside expanding partnerships with AWS, OpenAI, and SAP. Margins and guidance also beat as AI related revenue scaled faster than costs, prompting Snowflake to raise full year guidance and announce a new $6B AWS AI infrastructure agreement tied to expanding AI compute capacity. The Market LOVED this and the stock is up 37% after hours!

• Zscaler $ZS ( ▼ 31.52% ) top and bottom line beat with revenue at $850M and EPS at $1.08 vs. $1.01, driven by continued enterprise demand for cloud and AI cybersecurity as companies increased spending to protect growing AI workloads and zero trust networks. Annual recurring revenue rose 25%, but shares fell over 30% post earnings after management gave cautious Q4 revenue guidance of $875M-$878M due to sales leadership turnover, slower expected FY2027 ARR growth of 16%-17%, and higher AI infrastructure spending that could pressure free cash flow margins.

On The Move 📈 📉

• Dycom Industries $DY ( ▲ 25.84% ) ripped after the telecom infrastructure firm announced the $275M acquisition of National Technology Integrators to deepen its data center exposure and raised FY guidance.

• Abercrombie $ANF ( ▲ 8.88% ) climbed on a Q1 EPS beat ($1.47 vs $1.28), with tariff cuts and a $100M expected refund outweighing the hit to European and Middle East sales.

• Bath & Body Works $BBWI ( ▲ 9.7% ) rose after Q1 sales and EPS topped estimates, and management reaffirmed FY guidance.

• Verra Mobility $VRRM ( ▼ 70.57% ) crashed to a record low after Avis terminated its commercial services contract, wiping out $135-145M in annual revenue, triggering downgrades from JPMorgan, Morgan Stanley, and William Blair.

• IREN $IREN ( ▲ 13.48% ) rallied on a $1.6B deal to buy Dell’s air-cooled Blackwell systems for its Texas AI data center, set to lift annualized revenue from $3.7B to $4.4B by 2027.

• Ford $F ( ▲ 3.66% ) hit a three-year high on continued buying in Ford Energy, extending a 28% two week rally after Morgan Stanley valued the new $2B battery storage division at $10B.

IPO Roundup 📍 

• Quantinuum is seeking $1.05 Billion in an IPO. The quantum company majority owned by Honeywell is valued at almost $13 Billion despite only $30.5mm of revenue in 2025.

• ProLogium Technology Co. is going public via a SPAC merger with Translational Development Acquisition Corp. at a $3.8B valuation. The Taiwanese battery maker, backed by Mercedes-Benz, will use proceeds to fund a factory in Dunkirk, France, supported by up to €1.4B in French government subsidies.

• Powerlaw Corp., a closed-end fund holding stakes in SpaceX and OpenAI, debuted on Nasdaq Wednesday with shares opening at $35 and reaching $40, well above its $13.97 net asset value per share. Managed by Akkadian Ventures, the fund holds $604M across 18 private companies, including a $117M SpaceX stake and a $46.9M OpenAI position.

• Kardigan filed for IPO under the ticker KARD to fund three heart disease drugs in clinical trials, including one that could become the first approved treatment for a genetic heart muscle disease. The biotech raised $254M in a Series B last October, led by ARCH Venture Partners.

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Today’s Headlines 📖🍿 

• Jamie Dimon is looking for a $10B-$20B acquisition over the next two years: Any transaction would need to integrate cleanly into core operations, not sit standalone, but the JP Morgan CEO laid out in a fireside chat that an opportunity may be coming.

• The Trump Administration is in talks to fund US drone companies in an effort to increase domestic production and lower costs. Talks are still in the negotiations stage, but may include companies linked with Donald Trump Jr.

• Apex Service Partners, an HVAC services company, is nearing a minority stake sale that could value it at $10 Billion. Backed by Alphine Investors, the deal was moved into a continuation vehicle back in 2023 in a $3.4B transaction.

• Partners Capital forced Vista’s BDC to cap redemptions at 5%: The Swiss pension fund, holding 18% of Vista Credit Strategic Lending, sought to immediately redeem bonus shares, triggering Vista’s withdrawal limit.

• PGIM backs $4B US land-bank deals in asset-based finance push: Through a partnership with Domain Real Estate Partners, PGIM is financing homebuilders who sell undeveloped lots and pay a premium to repurchase them later, freeing builder capital while giving PGIM exposure to hard assets.

• Perella Weinberg cuts 10% of workforce, including a dozen partners: The investment bank is dismissing about 70 of its 700 employees, with cuts focused on underperforming areas of the business. PWP’s Q1 revenue fell 30%, and the stock is up just 2.4% over the past year, well behind Evercore’s 47% gain.

• ByteDance weighs $70B in AI capex this year: The TikTok owner, which generated $50B in profit last year, is looking to more than double its $25B 2025 capex to close the gap with US hyperscalers, while benefiting from materially lower Chinese data center costs.

• Companies hit with AI sticker shock as token spending surges 13x: Average corporate spend has jumped 13 times since January 2025, according to Ramp data from 50,000 customers, driven by agentic coding tools like Anthropic’s Claude Code and OpenAI’s Codex. Microsoft just canceled most of its Claude Code licenses, pushing engineers to use its own GitHub Copilot CLI instead.

• Private Equity is aggressively investing in personal injury law firms: Financings would be through MSOs, which handle non-legal expenses. Lawyers would keep control of the core practice and pay MSOs fair-market fees. Major players entering the space include Apollo, Fortress, and Stifel.

• Dell has been awarded a $9.7 Billion contract with the U.S. Pentagon to provide Microsoft enterprise software across the U.S. military.

• Warner Bros. prices $15B loan ahead of Paramount merger: The JPMorgan-led deal, upsized twice from $10B on strong demand, priced at 99.75 and S+250, giving investors an immediate par pickup if the Paramount-Skydance acquisition closes.

• Ferrari’s $RACE ( ▲ 1.0% )  Luce EV fallout continues: The $640K Jony Ive-designed electric vehicle marks a sharp break from Ferrari’s design DNA, and has been broadly criticized by the internet and Italians over the past few days. A former Ferrari Chairman said, “we’re risking the destruction of a legend.” Ferrari expects 20% of its 2030 lineup to be all-electric.

M&A Transactions💭 

Vaccine Company, developer of vaccine engineering technology, has reached a definitive agreement to be acquired for $1.55B by Eli Lilly (NYS: LLY). Lazard advised on the sale.

Terra Quantum, developer of a hybrid quantum algorithm, was acquired by Mountain Lake Acquisition II (NAS: MLAA) through a $3.5B reverse merger. Cohen & Company advised on the transaction.

Passport, provider of international shipping services, has reached a definitive agreement to be acquired for $350.0M by Global-e Online (NAS: GLBE).

LimmaTech Biologics, operator of a clinical-stage biopharmaceutical firm, has reached a definitive agreement to be acquired for $780.0M by Eli Lilly (NYS: LLY). Moelis & Company advised on the sale.

L-H Battery Company, manufacturer of lithium-ion batteries, was acquired for $2.48B by Honda Development and Manufacturing of America, a subsidiary of Honda Motor (TKS: 7276).

I Squared Capital entered into a definitive agreement to acquire 10 Data Center Facilities of Cogent Communications for $225.0M.

BioProtect, developer of a pro-space balloon system, has reached a definitive agreement to be acquired for $200.0M by Almeda Ventures (TAE: AMDA). EV/Revenue was 18.62x.

Veris Residential (NYS: VRE), a REIT, was acquired for $3.5B by Affinius Capital and Vista Hill Partners. EV/EBITDA was 14.0x and EV/Revenue was 11.69x. J.P. Morgan, Morgan Stanley, and Goldman Sachs advised on the sale.

Newcleo, developer of clean and safe nuclear technology, reached a definitive agreement to be acquired through a $209.0M reverse merger by Newhold Investment III, resulting in the combined entity trading under the ticker symbol NWCL. Guggenheim Partners advised on the transaction.

Black Buffalo, producer of tobacco-made alternative products, was acquired for $150.0M by Imperial Brands (LON: IMB). Goldman Sachs advised on the sale.

ArcLight Capital Partners, operator of a private equity firm, has reached a definitive agreement to be acquired for $1.05B by DigitalBridge Group (NYS: DBRG), a subsidiary of Softbank Group (TKS: 9984). Morgan Stanley advised on the sale.

Private Placement Transactions💭 

Zero One Automotive, manufacturer of intelligent heavy-duty transport vehicles, raised $200.0M of Series B2 venture funding from Gaocheng Capital, Long Capital, and Ondine Capital.

Stord, developer of a digital warehousing and distribution network, raised $250.0M of Series F venture funding led by Strike Capital at a pre-money valuation of $2.75B.

Nuclidium, developer of novel radiopharmaceutical tracers, raised EUR 115.0M of Series B venture funding led by Kurma Partners, Angelini Ventures, Wellington Partners, and NEVA SGR.

Cognition, AI coding startup, raised $1.0B led by Lux Capital, General Catalyst, and 8VC at a $26.0B valuation.

Focused Energy, developer of a commercializing internal fusion energy platform, raised $240.0M of Series A2 venture funding from East X Ventures, RWE, and SGInnovate at a pre-money valuation of $300.0M.

Capchase, developer of a recurring revenue financing platform, raised $200.0M of venture funding through a combination of debt and equity led by 01 Advisors.

Landian Technology, provider of automobile sales, raised CNY 6.67B of Series A venture funding from Saihu Company, Chongqing Shaci Zhiyuan New Energy Technology Partnership, Chongqing Yuexing Jiasheng, Changzhou Xingyu Automotive Lighting Systems, Jiangsu Bojun Industrial, and Wending Investment.

Volant Aerotech, developer of passenger electric vertical take-off and landing aircraft, raised nearly CNY 1.0B of Series C+ venture funding led by China Life Investment Management Company.

Thea Energy, developer of a scalable fusion energy technology, raised $100.0M of Series B venture funding led by US Innovative Technology Fund.

Video of the Day 

AI Computing Costs are on the rise

Almost half of Consumer Spending is from the 10%

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