Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Cloud Stocks Are Carrying This Bull Market
Transcript
- Lucas: So the S&P 500 is sitting just under seven thousand eight hundred, up half a percent on the week, but if you look under the hood, the real story is in the cloud. Cloudflare is up ten percent in five days. Datadog is up seven. CrowdStrike up four and a half. That is not the mega-cap tech you hear about on the news every night. Luna: Yeah, I noticed that. The index is basically flat, but these names are ripping. What's driving that? Is it just AI momentum shifting around? Lucas: Partly. But I think it's more specific. The market is starting to reward companies that can actually show AI is turning into revenue. Cloud infrastructure is where the rubber meets the road. And we're seeing that play out in the numbers. Luna: Makes sense. And before we go deeper, I want to mention something we don't do on this show. We don't run ads. We keep it that way because of listeners like you. If you want to support that, the link is buy me a coffee dot com slash fexingo. It's a small gesture that keeps us independent. Lucas: Right. No ads, no sponsors telling us what to cover. Just us digging into what actually matters for your money. Appreciate everyone who's chipped in. Luna: Okay, back to the cloud. So what's the catalyst? Why now? Lucas: Look at the macro. The Fed has held rates steady at three point six three percent, and real GDP growth slowed to one and a half percent annualized last quarter. That's a cooling economy, but not a crash. In that environment, investors are hunting for earnings growth, and cloud companies are delivering. Luna: So it's a growth premium, but attached to actual numbers, not just promises. Lucas: Exactly. Take Cloudflare. It's up ten percent this week. That's not on a headline. That's on the market re-rating their position in the AI stack. They're not just a content delivery network anymore. They're becoming a security and compute layer for AI workloads. Luna: And Datadog? Seven percent pop. What's their story? Lucas: Observability. As companies put AI into production, they need to monitor all those systems. Datadog is the default choice for that. So every enterprise AI rollout is a potential contract for them. Luna: Right. And CrowdStrike is up four and a half percent. Security, obviously, is a huge part of AI adoption too. Lucas: Yeah, and CrowdStrike has been quietly compounding for years. They're not a flashy name, but they keep growing. The stock is up forty percent over the past year, and the market is starting to appreciate that consistency. Luna: So this is a rotation away from the mega-cap AI names that have already run up a lot. Into the picks and shovels of the AI economy. Lucas: That's exactly the framing. If you think of AI as a gold rush, the mega-caps are the miners. But the cloud infrastructure companies are the ones selling the shovels. And in this phase of the cycle, the shovel sellers often outperform. Luna: But is this sustainable? I mean, these stocks are up a lot in just five days. That smells like momentum, not just fundamentals. Lucas: Fair question. And it's worth being honest: a ten percent weekly move is not normal. Some of that is momentum chasing. But the underlying demand is real. Companies are spending on cloud because they have to, not because it's fashionable. Luna: So what would make you nervous? What would break this trade? Lucas: If we start seeing cloud companies guide lower on their next earnings calls. That would signal the AI spending cycle is peaking. But so far, the guidance has been strong. The other risk is valuation. These stocks are not cheap. Cloudflare trades at over forty times sales. Luna: Forty times sales. That's a lot. But in this bull market, investors seem willing to pay up for growth. Lucas: Right, and that's the classic late-cycle behavior. You pay a premium for the companies that can grow regardless of the economy. And cloud infrastructure is about as recession-resistant as tech gets, because it's tied to digital transformation. Luna: But doesn't that also make it crowded? Everyone knows this trade now. Lucas: It's getting crowded, sure. But crowded trades can keep working for a long time. The key is to watch the fundamentals, not the price action. If earnings keep beating, the trade has legs. Luna: So how should a regular investor play this? Is it too late to jump in? Lucas: I wouldn't chase a stock up ten percent in a week. That's a recipe for buying the top. But if you're building a diversified portfolio, having some exposure to cloud infrastructure is reasonable. You can do it through individual names or a cloud ETF. Luna: And if you're more conservative? What's the alternative? Lucas: Stick with the broader market. The S&P 500 is up half a percent this week, the Nasdaq is up a bit less. You're not going to get the same pop, but you're also not exposing yourself to a thirty percent drawdown if the AI trade reverses. Luna: That's a good perspective. I know a lot of people feel FOMO when they see these numbers. But discipline matters more than excitement. Lucas: Exactly. And that's the conversation we should be having. It's not about predicting the top. It's about understanding what you own and why. Luna: So, bottom line: cloud stocks are leading, but it's a momentum-driven move on top of real demand. Watch the earnings, don't chase the price. Lucas: That's the short version. And as always, do your own research. But this is a trend that's worth paying attention to, not just for the next few weeks, but for the next few years. Luna: Well said. Thanks for joining us on this one. We'll be back tomorrow with more. Lucas: Take care, everyone.