When AI Demand Outruns Supply, This Hardware Stock Gets Interesting
Rising bond yields and renewed oil pressure are making the market less forgiving, but earnings are still producing clear winners.
This week’s five stay below the megacaps and focus on businesses where AI demand, consumer spending, or operating execution is already moving the numbers.
AI wealth (Sponsored)
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Hewlett Packard Enterprise (HPE)
Catalyst: Record revenue, higher 2026 and 2027 forecasts, and AI demand that is running ahead of supply
The Quarter
HPE delivered its strongest quarter in years.
Revenue jumped 34% to $12.2 billion, while adjusted earnings reached $1.11 per share. Both came in ahead of expectations.
The growth was broad, but networking stood out. Revenue in that segment surged 75% to $2.9 billion, helped by the Juniper acquisition. Data-center networking more than doubled, while routing revenue nearly quadrupled.
Cloud and AI revenue reached $9 billion, up more than 25%.
Guidance Moved Higher Again
Management raised its outlook for both this year and next.
HPE now expects fiscal 2026 revenue growth of 34% to 37%, up from its previous 29% to 33% range.
The company also lifted its fiscal 2027 revenue growth forecast to 13% to 17% and now expects adjusted EPS growth of 16% to 20% next year.
That makes this more than a one-quarter AI spike.
Demand Is Not the Problem
The biggest constraint is supply.
HPE said demand is running well ahead of available memory, NAND, CPUs, drives, and other components. The company is signing longer-term supply agreements to secure enough hardware to meet customer orders.
That creates a useful distinction.
When demand exceeds supply, investors need to watch margins and execution, not whether customers exist.
My Take: HPE remains one of the cleaner mid-cap AI infrastructure plays. Buy pullbacks while backlog, networking demand, and forward guidance keep moving higher.
What to watch: AI server orders, Juniper integration, component availability, networking margins, and fiscal 2027 guidance.
AI shift (Sponsored)
Artificial intelligence is changing the way companies operate—and one new initiative linked to Elon Musk is attracting attention.
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NetApp (NTAP)
Catalyst: Record revenue, 47% growth in all-flash storage, and a major guidance increase
AI Needs Somewhere to Put the Data
NetApp just reported its strongest first quarter ever.
Revenue increased 30% to $2.03 billion, while adjusted earnings jumped 66% to $2.58 per share.
The company’s all-flash storage business produced record quarterly revenue of $1.3 billion, up 47% from last year. Public Cloud revenue increased 28%.
Billings were even stronger, rising 36% to $2.06 billion.
The Outlook Changed
Management raised its full-year revenue forecast to between $7.98 billion and $8.23 billion.
Adjusted EPS guidance moved to $9.73 to $10.03.
That increase matters because NetApp was already coming into the quarter with improving demand. The latest report confirms that enterprise customers are spending more on storage and data infrastructure as AI workloads expand.
NetApp also acquired DataPelago, which specializes in AI data infrastructure.
One Number Needs Attention
Free cash flow declined 35% to $401 million.
That is the weak point in an otherwise excellent report. Inventory also increased as the company deals with higher demand and supply-chain complexity.
The market has good reason to scrutinize cash conversion when earnings are growing this quickly.
My Take: The earnings and AI storage story are strong enough to outweigh the cash-flow weakness for now. Keep NTAP high on the watchlist, but demand better free cash flow conversion over the next few quarters.
What to watch: All-flash storage growth, public cloud revenue, free cash flow, inventory, and execution against the higher guidance.
MongoDB (MDB)
Catalyst: Revenue grew 30%, and management raised guidance, but expectations finally caught up with the story
A Strong Quarter Was Not Enough
MongoDB reported $771.8 million in quarterly revenue, up 30% year over year and well ahead of expectations.
Adjusted earnings reached $1.90 per share, also comfortably above forecasts.
Management raised its full-year revenue outlook to between $2.99 billion and $3.03 billion and increased adjusted EPS guidance to $6.39 to $6.58.
Those are strong numbers.
The market still wanted more.
Atlas Is the Debate
MongoDB Atlas, the company’s cloud database platform, grew roughly 29%.
That would normally be an impressive result. Investors had been expecting acceleration beyond 30%, though, and the lack of a bigger jump triggered a sharp post-earnings reset.
This is where expectations become useful.
The business did not deteriorate. Revenue accelerated to its fastest growth rate in several years, and guidance moved higher. The disappointment came from how much optimism was already embedded in the story.
AI Still Needs Databases
AI applications need access to current operational data.
MongoDB is increasingly positioning Atlas as the database layer where developers can combine traditional applications, cloud workloads, and AI systems.
That does not guarantee every AI project lands on MongoDB, but the company has a real role in application modernization rather than an AI label pasted onto an unrelated business.
My Take: The post-earnings reset makes MDB more interesting. Strong revenue growth and higher guidance matter more than missing an unofficial Atlas growth target by a percentage point.
What to watch: Atlas growth, customer additions, AI application adoption, margins, and whether total revenue stays near 30% growth.
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Ulta Beauty (ULTA)
Catalyst: Strong beauty demand, higher guidance, and continued spending from younger and higher-income customers
The Consumer Is Still Buying Beauty
Ulta delivered another solid quarter despite continued concern about household spending.
Net sales rose 8.9% to just over $3 billion, while comparable sales increased 3.8%.
Operating income grew 10.1%, and earnings reached $6.55 per share, up more than 13% from last year.
Management raised both its sales and profit outlook.
Ulta now expects full-year sales growth of 6.7% to 7.2% and EPS of $28.70 to $29.00.
Prestige Is Holding Up
The interesting part is what customers are buying.
Higher-income shoppers and younger consumers continue spending on prestige makeup and fragrances even as inflation keeps pressure on other discretionary categories.
Ulta said customers are not meaningfully trading down.
Nearly half of sales now come from products exclusive to Ulta, giving the retailer another advantage over department stores and general merchandise competitors.
Growth Is Becoming Broader
The company added 13 net U.S. stores during the quarter and is integrating Space NK.
Store growth, exclusive products, loyalty data, and digital sales give Ulta several ways to grow without relying entirely on same-store traffic.
My Take: ULTA is one of the cleaner discretionary consumer names because demand is holding up without heavy discounting. Stay constructive while comparable sales and margins remain positive.
What to watch: Comparable sales, prestige beauty demand, store expansion, Space NK integration, and operating margins.
Best Buy (BBY)
Catalyst: Comparable sales improved, guidance moved higher, and technology upgrades are bringing customers back
Electronics Demand Is Waking Up
Best Buy is showing signs that the electronics replacement cycle is finally improving.
Second-quarter comparable sales increased 4.1%, compared with growth of just 1.6% last year.
Revenue reached $9.78 billion, while adjusted earnings rose 15% to $1.47 per share.
Computing has now grown for 10 consecutive quarters.
That is an important signal after years of weak post-pandemic demand for electronics.
The Upgrade Cycle Has More Fuel
Best Buy is leaning into newer product categories such as AI-enabled PCs, smart glasses, health rings, 3D printers, and collectibles.
Management said consumers remain careful about large purchases, but they are spending when a product offers enough innovation to justify upgrading.
That is exactly what Best Buy needs.
The company does not require another pandemic-era electronics boom. It needs enough genuine product innovation to restart replacement demand.
Guidance Moved Higher
Best Buy raised its full-year revenue forecast to $42.3 billion to $42.8 billion.
Adjusted EPS guidance increased to $6.70 to $6.90, while comparable-sales expectations moved higher as well.
The company also enters a leadership transition, with Jason Bonfig taking over as CEO later this year.
My Take: BBY is a recovery trade, not a defensive retailer. The improved comparable sales and higher guidance justify keeping it on the list while the electronics replacement cycle strengthens.
What to watch: Computing sales, AI-device adoption, appliance weakness, gross margins, and the upcoming CEO transition.
It's the first week of September. Markets historically stumble this month. What's the one portfolio move you'd make right now if you had to pick one?
- Add to my highest-conviction long. September weakness is a buying opportunity, not a warning sign.
- Raise 10-15% cash. I want dry powder if we do get a September pullback.
- Buy out-of-the-money puts on the index. Cheap insurance for a volatile month.
- Do nothing. Trying to trade September seasonality has cost me more than it's made me.
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