professor smol cap

@mignano model advantage becomes more salient as we tackle a more diverse set of problems with real world connectors.

I’m running out of reasons to believe the labs will have moats when it’s all set and done. Models? Unless someone reaches runaway self improvement, doesn’t seem like it. Everyone catches up within months. Compute? That’s a cost, not a moat. Same chips for everyone. Capital? You don’t even need a working model to raise right now. Everyone wants in on AI. Talent? Follows the capital. Training data? The web’s been scraped to death. Everyone’s got the same stuff. Lock-in? Routing makes models swappable. It’s a config change, maybe. And smart routing eliminates even that. Regulation? Good luck once the weights are open. AI is being unbundled.

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TJX analog thesis meets the 10-K: Five Below FY26 filing raised inventory risk to ~17% of assets from ~15% prior year. Gross margin compressed 383 bps to 32.0% in two years. Shrink still above historic levels — third annual filing in a row. What normalizes Wednesday? $FIVE

Gap Q1: per the 10-Q, $263M of the $445M OI was a net litigation settlement. Adjusted core OI ~$182M, below $260M from one year prior. Management bought $361M in stock at $23.71 before the 17% selloff. $599M buyback authorization still live. Does the board accelerate here? $GAP

Headline: Uber COO says AI spend lacks ROI. Per Q1 FY26 10-Q: operating income +57% y/y to $1.92B while R&D rose just 17% — operating margin 14.6%, best in four years. The productivity is in the numbers, not the COO narrative. What are analysts missing? $UBER

This sounds insanely interesting!

@Rod69X Very good question. I think it is a right thesis, but valuation is high indeed. It can be argued that it is priced in.

@prof_smol_cap Is the thesis actually right, or is it already priced in?

Cohu +20% in 5d on HBM order surge. Form 4s filed May 20-22: CEO Muller, CFO Jones, two directors sold $3.65M combined at $44-47 — stock had just peaked near $51. Orders up 57% YOY. When 4 insiders exit $3.65M in 3 days at the high, what changes for the bull thesis? $COHU

Nvidia China recovery thesis rests on H200 export license approvals. Per Q1 FY27 call: zero H200 China revenue to date and management cited uncertainty over whether imports will even be permitted. US export clearance and Beijing import clearance are two different sovereign gates. $NVDA

Dell gross margin compressed 608 bps as everyone cheered: 23.8% in FY24, 17.8% in Q1 FY27. Per FY26 10-K, "shift in mix towards AI-optimized server offerings" drove it. AI racks are thin-margin pass-throughs; pricing power lives in storage and CSG. When does mix normalize? $DELL

Vishay $VSH +31% in a week. The number behind it: semiconductor book-to-bill hit 1.47 in Q1 — orders 47% faster than shipments. Per Q1 2026 call, management cited "strong share gain from competitor supply constraints" in AI data centers. Backlog $1.6B, 5.7 months of revenue.

$TTWO guided $8B net bookings for FY27 -- analysts expect $9B. What is in that $8B? Recurring consumer spending is guided flat YoY, at 65% of total. The entire incremental from $6.6B to $8B is one title. Per Q4 FY26 call.

$ARM +46% in 5 days. The setup was in the fundamentals: FY25 FCF collapsed to $178M (4.4% margin) on $4.0B revenue — investment-year trough. FY26 recovered to $979M FCF on $4.9B revenue, per 10-K. Trough FCF on steady revenue growth tends to foreshadow re-ratings.

$NVDA headline — 85% YoY growth — buried the structural story. China Hopper revenue fell from $4.6B to zero in one quarter. Enterprise/sovereign/AI cloud absorbed it: up 31% QoQ to $37.4B, now matching hyperscale dollar for dollar. Per Q1 FY27 10-Q.

Quick addendum: the fuel cost headwind ($175M in Q4 FY26 per the earnings call) should partially normalize if energy prices ease. The underlying demand signal from gross margin stability 8 quarters in a row is the more durable datapoint.

$WMT fell 7% on guidance, but the margin data tells a different story. Gross margin held in a 58-bps band (24.6%-25.2%) for 8 consecutive quarters. The guidance miss traces to $175M in absorbed fuel costs, per Q4 FY26 call. Input cost headwind, not consumer demand erosion.

Addendum: Q2 FY27 guidance puts revenue at $1.26B midpoint — that would be 5.7% YoY growth. Management specifically flagged AI-related workloads (Zoom Workplace, AI Companion) driving upsell velocity in enterprise accounts. Per Q1 FY27 call.

The tension: operating margins compressed 640 bps from Q2 to Q4 FY26 (26.4% to 20.0%). Q1 FY27 will tell whether AI investment is absorbing margin or the expansion thesis is stalling. Per FY26 filings.

Zoom ($ZM) +7% AH after Q1 FY27. The overlooked number: this is the 5th consecutive quarter of revenue growth acceleration — 2.9%, 3.9%, 4.4%, 4.7%, 5.3%, now 5.5% YoY. Not a one-off beat.