Weekly|RSI Is the Real AI Variable, FCC Optics Curbs, APP & U Divergence, PLTR Crushes, NET Beat-and-Raise vs DDOG’s Expectations Reset, AXTI & ATI Records, SPCX First Print

After a week that broke momentum, this one sorted the tape by delivery. The names that put numbers behind the AI story got paid, and the names that were merely fine got marked down for being crowded. That is a healthier regime than the indiscriminate deleveraging we wrote about last week, and it is the one our preview work is built for.

Software was the axis. PLTR grew 93% YoY with US Commercial up 149% to $764mn, which is a direct rebuttal to the pre-earnings sell-side channel checks arguing US Commercial was rolling over; management then raised FY26 by $496mn, and only a quarter of that is the beat flowing through. NET accelerated to 36% and, more importantly, raised the full year by more than the beat — about $26mn of genuine second-half revision, with DBNRR back to 120%. DDOG did nothing wrong: 35.6% growth, core non-AI accelerating to high-20s, a renewed nine-figure OpenAI contract. It fell anyway, because expectations were full and positioning was crowded into the print, exactly the risk-reward our preview flagged. Fundamentals and setup are two different trades. The other pair worth sitting with is AppLovin and Unity: APP’s gaming revenue grew just 2% QoQ ex-commerce, the slowest in years, while Unity Ads put up 23% QoQ on the D28 rollout. We do not think that is a coincidence.

The piece we would most want read this week is our LLM deep dive. July took more than $1tn of AI-linked market value off the table on an argument about applications — whether coding is the last killer app. We think that is the wrong lens. The variable is recursive self-improvement, and the early signals are already in public data: roughly one month from the end of GPT-5.5 pre-training to release, an up-to-80% price cut three weeks after GPT-5.6 shipped, and AI’s measured contribution to internal R&D velocity going from 5% to 15-20% in six months. If RSI crosses its threshold, distillation-based catch-up gets harder, not cheaper, and compute becomes the least compressible input in the stack. The reference TAM stops being a software budget in the hundreds of billions and starts being a labor market in the tens of trillions.

Away from software, the physical bottlenecks kept printing. AXTI beat consensus by nearly 40% on revenue with record InP, and the COHR six-inch LTA plus the $87mn LITE deposit agreement turned what had been our qualitative call into signed contracts. ATI posted its strongest quarter since 2007 and raised the year for the second time, with AA&S margin up 930bps — scarce nickel and titanium capacity converting straight into price. And SPCX got its first print out of the way; from here the stock is a function of Flight 14 catching Starship on the tower in late August and whether the AI compute number revises from 5GW toward 10GW. We published sixteen reports across our channels this week; the rundown is below.

This Week’s Reports

LLM — the market is arguing about the wrong variable. The ladder that matters runs coding → continual learning → recursive self-improvement, and the early RSI signals are already visible in release cadence, pricing, and internal R&D velocity. If RSI crosses its threshold, compute is the deepest and least compressible moat in the stack.

Optics — the FCC rule is coming, and the definition of a “Chinese transceiver” is the whole trade. Whether origin follows CBP substantial-transformation standards or pierces ownership and control decides who keeps market access; two CBP precedents put the line at where the main PCBA is done.

APP & U 2Q26 — D28 IAA is now the core battleground. AppLovin grew 53% YoY but landed 1% below the high end of guidance, and ex-commerce gaming revenue rose only 2% QoQ — the slowest sequential rate in several years — while Unity Ads accelerated 23% QoQ as Day 28 campaign spend nearly tripled and adoption passed 25% of advertisers. Management calls it model-cadence timing; we read the pattern as a meaningful share shift, which makes the 3Q recovery a question about competition rather than AppLovin’s own model iteration.

PLTR 2Q26 — the US Commercial slowdown thesis did not survive the print. Revenue grew 93% YoY to $1.94bn with US Commercial up 149% to $764mn, and FY26 guidance rose $496mn — roughly $362mn of that a genuine second-half revision rather than a roll-forward of the beat.

NET 26Q2 — the security pivot is now visible in the numbers. Revenue accelerated to $696.1mn, up 36% YoY, DBNRR recovered from 118% to 120%, and FY26 guidance was raised ~$58mn with about $26mn added to the second half. Our preview called it from the channel: Zero Trust moving from ~15% to ~25% of one partner’s Cloudflare business, with enterprise platform consolidation replacing standalone CDN/WAF as the driver.

DDOG 26Q2 — unchanged fundamentals met with too-high expectations. Our preview said the print would be solid but that full 3Q expectations and crowded positioning left poor risk-reward into the event; the quarter grew 35.6% with core non-AI accelerating to high-20s, and the guide came light only because of OpenAI optimization.

Premium Report Snapshot

A portion of our research is reserved for Premium subscribers and is not distributed via Substack. Below is a snapshot of what Premium subscribers received this week beyond the Substack feed.

Subscribe now

Read more