Boockvar on AI Buildout, Earnings, Platinum and Fertilizer
The following is from Peter Boockvar:
The wide reach of this buildout/Earnings of note/Some other commodities to watch
Reflecting the broad economic reach of the GenAI CapEx binge, it is trickling down in so many places. I missed this line in the NFIB Small Business Optimism index press release and h/t SE for pointing it out. They said “Capital investments have been driving economic growth, primarily AI investments in chips and structures to house them in. Although this is not primarily a small-firm activity, it looks like spillover business opportunities are reaching them.”
Speaking of AI CapEx, Coreweave is higher post earnings even though they burned $5.7b in free cash in Q2 vs $4.7b in Q1 and $2.5b in Q4 ‘25. The expected free cash loss will be another $8.8b in Q3 with an estimated trimming of that for Q4 this year to -$6.2b. I see them as nothing more than an equipment leasing company but of course seeing a lot of demand right now for what they are offering.
They said this of note:
“We continued to execute on our power strategy, reaching 1.5 gigawatts of active power, adding nearly 500 megawatts more than any quarter in our history and more than tripling y/o/y. We remain firmly on track to reach at least 8 gigawatts by 2030.” For reference Doc Brown needed 1.21 gigawatts to send the DeLorean back in time.
“The debate around future demand for AI cloud infrastructure will likely continue, but what we know with certainty is informed by our customers’ actions. Demand continues to intensify as the market broadens across sectors, geographies, workloads and generations of GPU architecture. AI is no longer confined to frontier model labs. It is becoming embedded in software, industrial systems, financial markets, enterprise workflows and national security missions.”
“Pricing and margins for our Blackwell and Vera Rubin SKUs are setting new highs, while pricing for prior generation SKUs is at or above where it was years ago. Our near term capacity remains effectively sold out. That is translating into signed commitments on increasingly favorable terms from a broadening set of customer and is positioning CoreWeave to gain market share for years to come.”
You want to see some inflation? They also said, their “operating margin improvement came before our July pricing changes, which included an approximately 25% increase across SKUs in response to the current demand environment…We are also passing through component price increases.” Of course though their lessees are immune to that right now.
By the way, after Nvidia clarified the extent of its financial exposure to the MOU announced a few days ago, its 5 yr CDS fell 4 bps to 73.4 after rising by 5.5 bps in the day before.
Shifting to the consumer and the disappointing On Holdings results that saw its stock fall by 20% yesterday because results missed expectations:
“the sell-out of some of our everyday running franchises tracked below our ambitions in a highly promotional multi-brand marketplace, particularly in the Americas.”
From Cava, jumping 12% pre-market as comps rose 9% vs the estimate of 7.5%:
That comp was “driven by 5.3% traffic” and the balance with price, up 3.7%. They are benefiting from the healthy eating of mediterranean food and the growing demand for protein.
They saw wage growth for employees up by 3%.
“Earlier last month, concerns surrounding the Cyclospora outbreak impacted same restaurant sales. Those trends moderated meaningfully, though remained flat to positive. Peformance improved sequentially each week and most recently as concerns around the broader impact of the Cyclospora outbreak has begun to ease, our same restaurant sales performance has recovered to mid-single digits.”
“Our maintained full-year outlook incorporates the impact experienced to date as well as a prudent assumption regarding the duration of any remaining pressure, along with the macroeconomic and geopolitical fluidity.”
And finally this was interesting, “As we look at the income cohorts, we take every restaurant and stratify them based on the median household income in their market. And we are again seeing that the lower income cohorts are generating the highest same restaurant sales results.”
You’ve heard me express my bullish and long stance on commodities. I wanted to pinpoint a few specifically outside of my usual gold and energy (including uranium) positions. I’ll highlight platinum (we own they physical via an ETF) with 40% exposure of its demand exposed to autos (unlike palladium where it’s as big as 80%). Hybrid vehicles right now are winning the market share war vs EVs. In case you didn’t see, Bloomberg Businessweek had an article out a few days ago titled “Hybrid cars are hot again worldwide while EV sales slow sharply.”
The average hybrid uses about 5 grams of platinum vs about 4 for an internal combustion vehicle. Why? According to my friends at Goehring & Rozencwajg, “Catalytic converters operate best at high temperatures. In a traditional ICE vehicle, the engine runs continously, allowing the converter to reach and maintain those optimal temperatures. In a hybrid, the engine cycles on and off, which causes the catalytic converter to run cooler and less efficiently. To compensate, automakers must increase the loading of platinum group metals – sometimes by as much as a full additional gram per vehicle.”
According to the World Platinum Investment Council, the demand for platinum is expected to exceed supply in 2026 for the 4th straight year.
I’m also positive and long fertilizer stocks as a play on expected higher crop prices, believing that an ag bull market is to come, following precious metals, industrial metals and energy. Said by Mosaic last week, a stock we own and a producer of phosphate and potash:
“We believe global phosphate production will fall well short of last year by up to 30 million tons. With last year’s low application rates, especially in the US, and limited fertilizer availability this year, crop yields will suffer, which could lead to food security challenges around the world in the near term. We are already seeing evidence of challenges. In Brazil, for example, despite significant acreage expansion, total crop production forecasts for the year have not kept up, suggesting significant yield impacts. Another season of under application will only exacerbate the problem.”
“Only recently have crop prices begun to acknowledge the reality of production challenges around the world. In the past month, major ag commodity prices have moved up, providing some relief from high input costs for the world’s farmers. The outlook for farm incomes is improving, which should be a catalyst for fertilizer demand.”
Positions: None.
