Lenders join the AI build-out as 20 picks get ready to report
More of the money for AI chips and data centers now comes from loans, guarantees and new shares, and less from the spenders' own cash. The consumer staples raise prices again and pay more to borrow. Several recent results were helped by one-time gains, and 20 picks report between October 13 and October 29.
Lenders join the AI build-out
The AI build-out now leans on borrowing and guarantees, and less on the spenders' own cash. Broadcom backs a financial partner's leases of AI racks to one customer. If that customer does not pay, Broadcom pays the difference between 85% of the amount owed and the sale value of the racks, up to about $29 billion. The same customer can also issue up to $42 billion of convertible notes to Broadcom. On October 7 Bloomberg reported early talks on about $30 billion of debt for OpenAI's Broadcom chips, and the Wall Street Journal put the figure above $50 billion. Nvidia guarantees up to $105 billion of lease and power payments for an OpenAI data center campus in Ohio, starting in fiscal 2029. Its CFO said that AI labs that Nvidia backs with its balance sheet will be roughly a quarter of its business next year.
The spenders borrow too. In the first half of 2026 Alphabet issued $51.8 billion of notes, and in June it raised $49.6 billion net from new common and preferred stock. In August it sold $25.0 billion more of notes. Amazon held about $219 billion of Anthropic and OpenAI stock and notes at June 30, 2026. Press reports say Moody's expects Microsoft's free cash flow after dividends to be about $4 billion negative in total over fiscal 2027 and 2028.
Demand itself still looks strong. TSMC's third-quarter revenue was about NT$1.49 trillion, about 50% more than a year earlier and above its own guidance. At its October 6 Investor Day, Marvell raised its fiscal 2029 custom chip outlook to more than $12 billion, from more than $10 billion. Synopsys rose 12.8% on October 1 after its fiscal 2027 guidance came in above the analysts' consensus, and it now trades only 1.9% below its fair value. The risk has moved to the credit markets: if lenders pull back, orders can slow even while end demand stays strong.
Courts and regulators set the calendar
For several picks, the next big event is a court or a regulator, not a quarterly report. Meta expects about $10 billion of legal expense in its third quarter for its settlement with 52 state and territory attorneys general. In a second New Mexico case, the state asked a judge for $35 billion to $40 billion in penalties, and the judge is expected to rule in late October, close to Meta's report.
AppLovin now faces four legal fronts at once: a securities class action filed in September 2026, an older one from 2025, a suit that San Diego County filed on October 5, and its arbitration with Unity. Its fair value stayed at $470 while the stock fell about 43% in the third quarter.
Alibaba has been on the US Defense Department's list of Chinese military companies since June 8, 2026, and it is suing to get off it. Good results cannot remove that part of its discount. In California, the Assembly adjourned on September 1 without a vote on the wildfire reform bill, PG&E suspended its five-year plan on September 2, and Fitch moved PG&E's outlook to negative on September 16. The state regulator's proposed decision on the Kincade and Dixie fire costs, due on November 13, is PG&E's next hard evidence.
Fair values moved both ways
The fair value analysts changed several values in the past six weeks, and not always in the direction of the price. They raised Marvell to $360 from $300 after the October 6 Investor Day, their second raise in six weeks, so Marvell's discount widened to 23.5% even though the stock rose. They raised McDonald's to $295 from $270 after its September 23 Investor Day, while Wells Fargo, Guggenheim, KeyBanc and Bernstein cut their targets in the first week of October. On October 6 they raised their uncertainty rating for Copart to High, which widens the range around the $35 fair value.
At Honeywell Aerospace the two views stay far apart. After the August guidance cut, most analysts rate it Hold, with recent targets between $170 and $205, while the fair value is $256.
Experian's fair value on this site was wrong. The fair value analysts cut it to $42 from $45 per ADR on June 10, 2026, and cut the moat to Narrow on the same day, but the site showed $55 from the day the pick was added. At $35.48, Experian trades 15.5% below the correct value, not about 35% below. The October 1 note now uses the correct value.
Staples raise prices and pay more to borrow
The consumer staples, where analysts are least hopeful, now face higher costs on both their goods and their debt. PepsiCo confirmed on October 9 that it will raise prices on some snacks and drinks by single-digit percentages, and named higher fuel, aluminum and farm costs. Its prices stay below their level at the start of 2026. After its third quarter, brokers cut their targets to between $126 (Barclays) and $165 (Goldman Sachs).
Campbell's issued junior notes at 8.5% on October 5, rated below investment grade, to repay 5.20% notes due in March 2027 and commercial paper. Moody's cut it to Baa3 with a negative outlook on September 23, and the board had already cut the dividend by 36%. At 53.7%, CPB still has the largest discount on the list.
Clorox guides fiscal 2027 organic sales growth of about 3.5% to 4.5%, but more than 3.5 points of that come from an easy comparison with fiscal 2026, when an ERP change disrupted orders. Its fiscal 2026 dividends of $602 million were larger than its free cash flow of $405 million. Procter & Gamble's fiscal 2026 growth came only from price, with flat volume, and it expects first-quarter core EPS to fall 5% or more. HSY reports on October 29 and CLX about November 2.
One-time gains helped recent results
Several recent results looked better than the business underneath. At AutoZone, tariff refunds added 145 basis points and a LIFO gain 105 basis points to fourth-quarter gross margin, more than its whole rise of 182 basis points. Without them, the margin fell about 68 basis points, so the site's checkpoint for that quarter now reads failed. Tariff refunds also added 4 percentage points to PepsiCo's third-quarter core operating profit growth, and they stop after the third quarter.
UnitedHealth's medical care ratio improved to 86.7% in the second quarter of 2026, from 89.4%, but $860 million of favorable changes to earlier reserves helped. Its third-quarter test is the ratio against its full-year guide of about 88.1% without large reserve releases. Novo Nordisk's first-quarter profit included a one-time DKK 26.8 billion reversal of a US rebate provision, and Novo has warned of a possible non-cash impairment in the third quarter after a failed trial.
Rates move against the borrowers
Rates kept rising for the picks that need cheaper loans. The Freddie Mac 30-year mortgage rate rose from 6.43% on July 2 to 7.40% on October 8, and the 10-year Treasury yield was 5.24% on October 9. ICE bought Black Knight for a mortgage recovery that has turned the other way, but its exchanges carry the quarter: third-quarter trading volume was 31% higher than a year earlier. Pool sells to pool builders, and new in-ground pool construction in 2025 was just below 60,000 units, about half the 2021 peak of about 117,000. Brookfield and its asset manager fell about 20% from mid-August to late September.
Schwab earns more on client cash when rates rise, but its stock fell about 6% on September 22 on fear that AI assistants such as Meta's Muse could weaken client loyalty. Its August core net new assets were 46% higher than a year earlier. Capital limits its buybacks more than cash does: its adjusted Tier 1 leverage ratio of 6.8% sits at the bottom of its 6.75% to 7.00% target.
The next two and a half weeks
From October 13 to October 29, 20 of the 44 picks report, and all but two of those dates are confirmed. UNH opens on October 13 with its first report since the 2027 Medicare Advantage star ratings. Analysts at J.P. Morgan and Stephens estimate that the share of its members in plans rated 4 stars or more fell to about 67%, from about 78%. Copart's offer for ACV Auctions expires on October 15, two days after the US antitrust waiting period ends, and TSM and SCHW report the same day.
SAP (October 21) and RELX (October 22) are again the first tests of the fear that AI tools will replace software and data. PG, PCG and POOL also report on October 22. October 28 is the busiest day: MSFT, GOOGL, NOW, HONA and OTIS report, META is expected to, and the Fed announces its rate decision. Microsoft guides Azure growth of 44% to 45% in constant currency, on a new definition that leaves out GitHub cloud and some security and healthcare products. Meta's profit will carry its legal charge, so its cash flow gives the clearer reading. ICE and HSY report on October 29, AMZN is expected the same day, and MarketAxess holders vote on ICE's offer.
Most AI suppliers report later, after their customers have set their plans: NVDA about November 18, MRVL about December 1, SNPS about December 9 and AVGO about December 10. All four dates are estimates.
Companies: UNH, CPRT, TSM, SCHW, SAP, RELX, PG, PCG, POOL, MSFT, GOOGL, NOW, HONA, OTIS, META, ICE, HSY, AMZN, NVDA, MRVL, SNPS, AVGO