markets

Matt Phillips9/24/25

Momentum stocks sputter, weighing on markets

Risky momentum stocks that retail traders piled into this year sputtered on Wednesday, throwing a bit of sand in the market rally.

Recent retail favorites like Rocket Lab, Hims & Hers, Palantir, Oklo, and SoundHound AI — all members of Goldman Sachs’ thematic basket of “high beta momentum stocks” — were in the red on the day, with little specific company news, suggesting the pullback is more about the market rethinking a broad-based trade rather than expressing specific concerns about individual companies.

Shortly before 1 p.m. ET, the iShares MSCI USA Momentum Factor ETF was down 0.7%, its worst day since late August.

Why is momentum suddenly sputtering? That’s the tricky bit.

The current crop of momentum stocks tends to be stocks with very high valuation ratios, suggesting that the traders buying them are betting their earnings will come far in the future rather than any time soon. (That is, of course, if they’re not just buying them based on the fact that they’ve gone up a lot.) But it’s impossible to say exactly why the momentum trade is fizzling a bit today.

It could be that after a giant romp — Rocket Lab, for example, is up almost 50% over the last three months — these stocks just need a breather.

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Applied Digital surges after announcing $7.5 billion data center lease contract with its third hyperscaler client

Applied Digital is soaring in early trading after the data center company announcing that it’s booked its third hyperscaler client.

This customer signed a lease for $7.5 billion in contracted value over a 15-year period covering 300 megawatts of IT load at a location expected to begin operations in mid-2027.

“This addition expands total contracted lease revenue to over $23 billion and further diversifies the company’s customer base with a third hyperscale tenant,” per the press release. “More than 50% of total contracted revenue is now backed by investment-grade customers.”

During the company’s Q2 conference call in January, CEO Wes Cummins said Applied Digital was in “advanced discussions” on deals with another investment-grade hyperscaler for three different sites. During the Q3 earnings call earlier this month, Cummins said he was “more optimistic” that leases would get signed in the near term.

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Avis’ announcement of Q1 earnings next week may portend an imminent share offering

A lack of rental cars was a big issue for American travelers in 2021.

A fresh supply of rental car company shares may become a big issue for fans of the Avis short squeeze.

After the close on Wednesday, following its whopping 38% plunge, the company announced that it would be releasing its Q1 results on April 29. Why is that important?

This is not financial advice, but it would seem prudent for Avis’ management to take advantage of its richly valued shares to raise money. Its forward price-to-earnings ratio has spiked to above 135 during this parabolic advance and analysts at JPMorgan just downgraded the shares to underweight citing an “unsustainable valuation.”

A share offering would alleviate one of the presumptive factors behind the ferocity of Avis’ 427% gain from March 30 through Wednesday’s close: that its two biggest holders dominate the float, and as such, it may be difficult for short sellers to extricate themselves from their bets against the stock. That angle may have already passed its best before date, however, as trading volumes in excess of $19 billion this week somewhat undermines the argument that shorts struggling for liquidity are locked into losing positions.

Share offerings are what companies who benefit from big spikes out of nowhere tend to do (ask AMC!), unless they can’t. And if they can’t, they aim to find a way around that (ask GameStop!)

About two years ago, during the Return of Roaring Kitty meme mania 2.0, the video games and collectibles retailer was seemingly constrained from offering shares because it was in a “blackout period” ahead of earnings (which had been scheduled for June 7). As such, management released preliminary results on May 17 along with plans to sell up to 45 million shares on the open market.

It’s impossible to tell if Avis pulled forward the date of its earnings in order to capitalize on its elevated stock price. But we’d be remiss not to note that Avis has not released its Q1 results in the month of April since 2006. Typically, they’ve dropped in the first week of May (last year, on 5/7).

I’ll take this opportunity to recycle one of my favorite tweets on the subject.

Alzmann levered — @RodAlzmann / X

For any corporate entities offended, we would of course concede that one person’s "shitco" is another person’s deep value, diamond in the rough, turnaround story — and that’s what makes a market.

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Claire Yubin Oh1h

Texas Instruments soars after beating on Q1 revenue, with strong guidance to match

Texas Instruments surged more than 10% in premarket trading on Thursday after the chipmaker reported better-than-expected Q1 results and a surprisingly strong second-quarter forecast, driven by growing demand for its analog chips.

Per its press release, the company reported the following results for its fiscal first quarter:

Revenue of $4.83 billion, handily beating analyst estimates of $4.52 billion (compiled by Bloomberg).
Adjusted earnings per share of $1.68, up 31% year over year and topping Wall Street estimates of $1.37.

Texas Instruments specializes in making analog chips, which regulate power systems and convert signals like sound or light into digital data that semiconductors can process. Though far from the sexy chips that do AI compute work, like the heavily in-demand kind that Nvidia and others design, TI’s products still seem to be getting a lift from all this spending.

Noting a “continued acceleration in industrial and data center” verticals, the company’s top line seemed to get a big boost, with demand from industrial end markets up 30% and data center demand growing 90% year on year, too. CEO Haviv Ilan commented in the earnings call, “We remain well positioned with inventory and capacity that allows us to support our customers with competitive lead times through the cycle.”

While the company’s revenue is still short of its 2022 peak, Ilan also added that “there is a lot of room to grow,” and is optimistic that the run-up can continue. Indeed, for the coming second quarter, Texas Instruments expects revenue in the range of $5 billion to $5.4 billion, well ahead of current analyst expectations for $4.8 billion.

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Claire Yubin Oh2h

Netflix announces $25 billion share buyback boost

Netflix is ticking up in premarket trading on Thursday after the streaming giant announced plans to buy back an additional $25 billion worth of shares, roughly 6% of the company’s market cap as of yesterday’s closing price.

Per the company’s regulatory filing, reported on Wednesday evening, Netflix’s board authorized the repurchase program in addition to the buyback plan announced in December 2024 that still had ~$6.8 billion available for purchase.

Netflix is down more than 13% since the close of trading on April 16, the day before the company reported disappointing first-quarter results as well as announcing that cofounder Reed Hastings will be stepping down as its chairman in June. The plan likely comes as a small surprise for Wall Street, as Netflix had announced in its latest earnings call that it would make no changes to its capital allocation program, despite expectations that the company may use the increased financial headroom from the now axed Warner Bros. Discovery deal to do so.

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Max Knoblauch2h

American Airlines cuts its full-year earnings forecast, reports better than expected Q1 revenue

The final of the big four US airlines to drop its Q1 earnings, American Airlines, did just that on Thursday morning before markets opened. The carrier’s shares ticked down in premarket trading.

For Q1 2026, American reported:

An adjusted loss of $0.40 per share, compared to the loss of $0.47 per share expected from Wall Street analysts polled by FactSet.
$13.91 billion in revenue, compared to estimates of $13.79 billion.

Looking ahead to Q2, the company expects adjusted earnings per share of between -$0.20 and $0.20, compared to the $0.08 loss expected by Wall Street. For the full year ahead, American forecast adjusted earnings of between a $0.40 loss per share and earnings of $1.10 per share, lower than its earlier forecast of $1.70 to $2.70 per share. Analysts expected a loss of $0.65.

American said it paid $2.93 billion for fuel and related taxes in the quarter, up 13.2% from the same period last year.

Like the rest of its major rivals, American airlines hiked its bag fees earlier this month in an attempt to offset fuel costs that’ve spiked amid the war in Iran. In March, American boosted its sales outlook on stronger than expected demand.

Lately, the airline has spent time and effort rejecting rumors that it could potentially merge with rival United Airlines. Recent reports that United CEO Scott Kirby had floated the idea to President Trump sent American’s shares climbing, but they’ve since pared most of those gains. On Tuesday, the president said he doesn’t like the idea of the merger.

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