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Two different ideas in the same market… Which one is right?… What earnings actually do… The one variable to watch to protect your portfolio… One of Louis Navellier’s best stocks today
Two articles were published this week, covering different cases around the same market. Someone said we are in a bubble. The other said we might be earlier in the cycle rather than later.
Both are worth taking seriously – but which is right?
on monday, Fast company He presented 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 reached their all-time highs.
- Focus on a handful of huge names.
- AI startups raise billions ahead of IPOs echoes of 1999.
But yesterday, Goldman Sachs CEO David Solomon sat down with him CNBC He said something a little different…
Asked whether markets could absorb a series of massive equity offerings from OpenAI, Anthropic and SpaceX, Solomon said there was plenty of liquidity, greed had trumped fear, and most importantly:
Abundance can last for long periods of time…
There is a good chance that we will be earlier in the cycle rather than later.
He also noted that gains made by AI companies could create a self-reinforcing cycle in which employees and investors recycle profits into new taxes and projects.
Same market conditions. Different conclusions.
So, what framework should we use when we try to organize our investment portfolios wisely?
It’s not wrong for bears to get stressed
Billionaire Ray Dalio, founder of the world’s largest hedge fund, Bridgewater, has described the AI boom as “the early stages of a bubble,” comparing current levels of euphoria to about 80% of what preceded the dot-com bust.
This isn’t always someone who can be ignored on Reddit. He is one of the most rigorous holistic thinkers alive.
Breadth anxiety Fast company Raised letters are also legal. When a handful of stocks do most of the heavy lifting, a fair question is whether the rally is based on a broad or narrow foundation.
Additionally, there are real big headwinds on the calendar right now.
In yesterday’s issue of Accelerating profitslegendary investor Louis Navellier pointed to four potential catalysts for volatility over the next 15 days alone:
- Consumer Price Index on June 10
- Producer price index for June 11
- The first meeting of the Federal Open Market Committee, chaired by new Fed Chairman Kevin Warsh, is on June 16-17.
- and Quadruple Witching Day on June 18 (a quarterly event in the stock market when four different types of financial derivatives expire simultaneously, resulting in a massive spike in trading volume).
Lewis does not rule out the risk of significant volatility following any of these events.
So, there are plenty of good reasons to be cautious today. Anyone who pretends otherwise is not being honest with you.
But as we highlighted digest Recently, the bears have focused too much on just one trend
back.
I’ve been emphasizing this because it’s a critical awareness for investors to hold.
the Fast company An article comparing today’s market to the dot-com mania. For perspective, the overall forward P/E for the technology sector was 50 at the time. Today it’s about 30.
Richly priced? Yes. Nosebleed? no.
More importantly, the companies that led the dot-com bubble were collectively destroying capital. cisco (cisco) Traded at 200 times earnings. Pets.com did not have any profits. The entire thesis was based on future revenues from the Internet economy, which, although real, was years away from generating cash.
Companies leading the rise in artificial intelligence today – nvidia (NVDA), Microsoft (MSFT), alphabet (Google), Amazon (Amzn) and dead (dead) – It is among the most profitable in corporate history. Nvidia alone reported net income of more than $120 billion in fiscal 2026. Microsoft, Alphabet, Amazon, and Meta combined generated $350 billion in free cash flow in their most recent fiscal years.
Can the market escape record profitability and turn into a classic bubble at the same time? These two things are definitely in conflict.
Which leads us to an important question…
What do earnings tell us?
Latest collection of facts See profits The report published last Friday provides the answer to this question – and it is astonishing.
S&P 500 earnings growth for the first quarter of 2026 reached 28.6%. This is the highest earnings growth rate the index has reported since the fourth quarter of 2021, and the sixth straight quarter of double-digit growth.
Additionally, at the beginning of the quarter, analysts expected growth of 13.1%. The reality was more than double this estimate.
It gets better…
In a typical quarter, analysts reduces Earnings estimates for the first two months of the following quarter. The average historical decline over the past 20 years is 3.2%. This time, analysts more Q2 estimates were up 2.5% – the largest upward revision in the first two months of the quarter since Q3 2021.
Finally, the S&P 500’s blended net profit margin for Q1 2026 is 14.8%. If that holds, this would be the highest net profit margin FactSet has recorded since it began tracking this metric in 2009.
The previous record was 13.2%, which was recorded only in the last quarter.
No wonder why Lewis had just told his son Accelerating profits Subscribers:
We are still in one of the best earnings environments of our lives.
FactSet currently estimates that the S&P 500 will deliver average earnings growth of 21.6% and average sales growth of 12% in the second quarter.
But S&P 500 companies are likely to report higher earnings growth for the second quarter.
Bubbles are often characterized by a large number of companies burning cash rather than generating record profits. The data and narrative point in different directions.
If the earnings picture is so strong, why do analysts continue to downplay it?
One main reason is that the spending commitments behind these earnings are larger than most models represent.
Google, Amazon, Microsoft, and Meta have collectively committed $725 billion in capital expenditures for 2026 alone – a 77% increase from last year’s already historic levels. This money flows directly into the revenues of every company supplying the building: chip makers, data center operators, energy infrastructure providers, and networking equipment companies.
And this is only 2026…
In Nvidia’s latest earnings call, CEO Jensen Huang predicted that global spending on AI infrastructure will reach $3 to $4 trillion annually by 2030. The current consensus model on Wall Street has an over-sized capex of $1.03 trillion in 2028.
The gap between these two numbers – consensus versus Hwang’s reality – is precisely why earnings continue to come in well above analysts’ expectations. Models are based on outdated assumptions. Spending is not.
The essential question that provides clarity
Bubble warnings. Geopolitical risks. The Fed is under siege. Quadruple magic. Consumer confidence fluctuates. Whispers of stagflation.
It’s a lot.
Lewis has spent decades watching investors shaken out of their winning positions by exactly this kind of noise.
But over those same decades, in order to help investors, he distilled the markets down to a single organizing principle—one so reliable, and so consistently confirmed by history, that he gave it a name.
Here is Lewis’s “Iron Law of the Stock Market” in his own words:
Stock price trends can differ from earnings trends for a period of time, but over the long term, if a company grows and the amount of cash it takes in increases, its stock price is sure to rise.
That’s it – the entire frame.
Notice what the Iron Law does not require…
You are not required to solve the bubble discussion. Or find out whether Dalio or Suleiman is right. Or predict what Fed Chairman Warsh will say on June 17. Or how the market will react to the CPI reading on June 10.
It asks you one question – although it’s actually two parts: Are the companies you own growing their profits, and is today’s price reasonable compared to where those profits are going?
This second part is important. A growth company that trades at a ridiculous multiple compared to its future earnings is a different animal than one whose forward valuation still makes sense.
This is why tracking P/E – which looks backwards – can be so misleading at the moment. Companies on the direct path to building AI aren’t just increasing profits today. Analysts are raising their future estimates at the fastest pace in five years.
Here’s something else worth remembering…
The market is not one big bloc. It’s thousands of individual companies, each with its own earnings story.
Some AI-adjacent stocks may be overvalued compared to their fundamentals. Others are not – our job is to find out which is which.
Of course, this is precisely why the concerns on the table now — Iran, stagflation, a paralyzed Fed, excessive valuations in certain corners of the market — are worth taking seriously at the individual stock level, but they are no reason to abandon positions in companies with accelerating earnings and data-backed future valuations.
So, let’s be clear…
Volatility is coming – Lewis said so himself. But volatility is not the same as permanent loss.
Especially for companies that are posting record profit margins, beating previous earnings estimates by the largest margin in years, and sitting on the direct path to building the most critical infrastructure in the history of technology.
If you are stressed today, listen to your concerns, but frame them in the context of facts.
What does the Iron Law look like in practice today?
If you want a live example of this framework in action, check out Super Micro Computer Company (SMCI)one of Lewis’ current top picks Accelerating profits.
Super Micro builds the high-density servers that power AI data centers. It’s exactly the kind of company Iron Law was built for.
Here’s Lewis:
In Q3 FY2026, Super Micro Computer achieved 122.6% year-over-year sales growth and 171% year-over-year profit growth.
Adjusted EPS beat estimates by 35.5%.
Analysts have increased their Q4 earnings estimates by nearly 27% in the past month alone, and are now calling for earnings growth of 73.2% year over year.
This is not a story about a speculative startup chasing an AI story. This is an iron law at work in real time – a company in the direct path of $725 billion in annual spending.
Louis rates SMCI a Buy at under $49. As I write on Wednesday, it is trading just under $47.
Bottom line
The bubble debate will continue to make headlines. Dalio will continue to sound the alarm. Fast company We will continue to find styles that are true to 1999.
None of this is without merit, but none of it changes what profits do now.
Stay focused on the right question, own the right companies, and let the Iron Law do what it always does.
By the way, Lewis is on to something big today – as always, grounded in a profits-focused market approach. More on that later this week.
Before we sign…
Today is the last day to catch Free replay of last week Peak convergence With market veterans Jonathan Rose and Mark Chaiken.
They have spent the last few months combining two of the most powerful “smart money” indicators into one “convergence catalyst.”
This combined catalyst, tested across nearly 200 real trading trades, produced an 81% win rate and an average profit of 147% – and two out of every three losing trades were liquidated.
today Last day to check it outSo if you want to watch, this is your last call.
I wish you a good evening,
Jeff Remsburg
(Disclaimer: I own MSFT, GOOGL and AMZN)
