Dear Friend,

The SpaceX S-1 just revealed a number that should stop every AI investor cold.

$7.7 billion.

That's what SpaceX spent on AI infrastructure in a single quarter.

Not chips. Not software.

Power infrastructure.

The S-1 shows $23.85 billion in servers. $14 billion in construction in progress. And one glaring dependency: the company that builds the equipment to actually turn it all on.

Without this company's hardware, Colossus doesn't run. The $1.25 billion Anthropic pays every month doesn't flow. The entire AI empire goes dark.

The stock is still trading like nobody's read the filing.

Dylan Jovine has — and he's giving away the name.

See the S-1's most critical dependency — free >>

“The Buck Stops Here,”
Kelly Maguire
Behind the Markets

The Great Cloud Divide: How AI Is Reshuffling the Software Deck

Author: Jeffrey Neal Johnson. Article Posted: 5/20/2026.

Enterprise software is undergoing a major transformation driven by AI, unleashing unprecedented market expansion for platforms that are adopting autonomous architecture. A shift is underway, splitting the legacy Software-as-a-Service (SaaS) ecosystem into clear winners and losers and effectively ending the era of blanket multiples for cloud software. Investors are now tasked with identifying the companies building this new economy, while old advantages are rapidly becoming new liabilities.

Two sector titans, ServiceNow (NYSE: NOW) and Salesforce (NYSE: CRM), offer a compelling view into this divergence. ServiceNow is capturing immediate structural premiums by establishing an enterprise-wide AI governance backbone. Salesforce, facing pressure on its legacy model, is deploying an additional $25 billion to its capital restructuring program and using a targeted $300 million commitment to Anthropic to turbocharge its ecosystem into a dynamic, AI-native CRM powerhouse. This difference in strategy creates a unique environment for investors, highlighting two distinct paths to capitalizing on the AI revolution.

ServiceNow's AI Moat: Building the Enterprise Brain

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When the SpaceX IPO launches, most retail investors will be locked out. The banks, funds, and insiders get in early - while everyone else waits on the sidelines.

But one small infrastructure supplier - a critical piece Musk can't scale the Colossus network without - is still trading well under institutional radar. A new briefing reveals the name and ticker at no cost.

Get the SpaceX infrastructure stock name and ticker here

ServiceNow appears poised to benefit from the strategic pivot from a workflow tool to a core enterprise intelligence engine. The market is rewarding this shift, with ServiceNow's share price rallying after Bank of America initiated coverage and set a $130 price target.

The bank flagged ServiceNow as a major beneficiary of agentic AI, with its business model offering some insulation from the disruption hitting traditional software. The firm's forward price-to-earnings (P/E) ratio is elevated at 44, reflecting investor confidence that this advantage will drive significant earnings growth.

ServiceNow's Pivot to AI Rulemaker

The recent Knowledge 2026 conference solidified this transition. ServiceNow leadership moved beyond standard IT Service Management (ITSM) with the launch of the Workflow Data Fabric and AI Control Tower. These products represent a new architectural layer designed to manage and govern autonomous AI agents across an entire organization.

This positions the Now Platform as an indispensable governance backbone, a central nervous system for enterprise AI that could drive substantial long-term contract value. Top-line growth of 22.1% in the last quarter underscores the existing demand for its integrated platform, a demand that may accelerate as this new governance layer becomes an industry standard.

Amplifying Platform Power With Deep Partnerships

ServiceNow is amplifying its platform advantage through deep-rooted partnerships. The recently announced collaboration with Experian is a prime example. Experian's Ascend decisioning platform is embedded natively within the ServiceNow AI Platform. This architecture is critical, as it eliminates external data call latency and enables the instant activation of autonomous agents for high-margin workflows such as third-party risk management and identity verification. By embedding such crucial functions, ServiceNow makes its platform stickier, creating a significant competitive moat built on speed and data integrity that is difficult for competitors to replicate.

Salesforce's All-In Bet: Deploying the War Chest

While ServiceNow builds a new foundation, Salesforce is executing a massive pivot to adapt its legacy empire. The market has been skeptical, with Salesforce stock contracting over 30% year-to-date and Bank of America initiating coverage with an Underperform rating.

The bank's thesis hinges on potential AI monetization bottlenecks and the repricing of Salesforce from a hyper-growth asset to a mature cash generator.

The modest forward P/E of 18 reflects this cautious sentiment, suggesting investors are waiting for proof that this titan can successfully navigate the AI transition.

The $800 Million Answer

Despite market concerns, Salesforce is already demonstrating tangible returns on its AI strategy. Its agentic AI protocol, Agentforce, has generated an impressive $800 million in Annual Recurring Revenue (ARR) from 29,000 deals in its first 15 months. To fuel this growth, Salesforce management has committed about $300 million in capital expenditures for Anthropic tokens in fiscal 2026. This is a direct, high-conviction bet on large language models to drive the next wave of CRM functionality, moving beyond a simple user interface to a proactive, automated sales and service engine that can justify its premium pricing. This early revenue is the critical proof point Salesforce needed to validate its capital-intensive strategy.

Betting on the House: Using a Balance Sheet as a Weapon

Salesforce management is backing this operational pivot with an aggressive capital allocation strategy. By authorizing an additional $25 billion for share repurchases, the board has effectively doubled the program to $50 billion, a decisive move that signals profound confidence in the company's intrinsic value.

However, this buyback is financed through leverage, with Salesforce syndicating corporate bonds to fund the repurchases. This debt-financed strategy fundamentally alters the capital structure, increasing financial risk but also offering significant potential upside for equity holders if the AI-driven turnaround succeeds. It is a powerful statement that Salesforce management believes its own stock is the best investment it can make, betting that AI-driven cash flow will outpace the cost of its new debt.

Growth Vs. Value: 2 Paths to Software Sector Alpha

The differences between ServiceNow and Salesforce provide a clear roadmap for the evolving software landscape. ServiceNow's strategy of building an indispensable AI governance layer is attracting a premium valuation, as investors identify it as a critical piece of future enterprise infrastructure. The technical setup is also notable, with a bullish 7.90 10-day call-to-put ratio clashing with rising 4.79% short interest, creating conditions that some investors might see as favorable for a potential squeeze.

Conversely, Salesforce presents a value-oriented turnaround narrative. Salesforce is leveraging its immense scale and cash flow to fund a transformative pivot, backed by a significant, debt-fueled buyback. Investors considering Salesforce may be looking at a company priced for skepticism, even as its internal AI initiatives are already bearing fruit with $800 million in new ARR.

Salesforce's upcoming Q1 2027 earnings report on May 27 will be a critical data point, offering a glimpse into whether its AI-native strategy can re-accelerate growth and justify its massive capital commitments. Cautious investors may prefer to monitor the name for sustained margin expansion and AI adoption rates before taking a position, while others might see the current valuation as an attractive entry point for a long-term AI turnaround.

As Small-Cap Outperformance Continues, These 2 ETFs Provide Exposure

Reported by Jessica Mitacek. Published: 5/21/2026.

The eye-catching performance of some of the world’s largest stocks has made them fixtures in many investors’ portfolios. Whether that exposure comes through market-cap-weighted funds or direct ownership, their collective gains have overshadowed the roughly 2,500 other U.S.-listed stocks that do not meet the criteria for inclusion in the S&P 500.

This year, however, a dramatic and structural shift in the market has favored smaller, more nimble firms whose stocks have generated gains that have outpaced their larger peers by a wide margin.

How Small-Cap Stocks Have Managed to Outperform This Year

The #1 stock to buy BEFORE the June 12th filing (Ad)

When the SpaceX IPO launches, most retail investors will be locked out. The banks, funds, and insiders get in early - while everyone else waits on the sidelines.

But one small infrastructure supplier - a critical piece Musk can't scale the Colossus network without - is still trading well under institutional radar. A new briefing reveals the name and ticker at no cost.

Get the SpaceX infrastructure stock name and ticker here

Small caps generally have market capitalizations that fall between $250 million and $2 billion. For context, NVIDIA (NASDAQ: NVDA)—the largest publicly traded company on the planet—currently sports a market cap of around $5.41 trillion.

But after years of double-digit gains for the S&P 500, 2026 has been an underdog story for companies that don’t qualify for that index.

That has put a spotlight on small-cap companies, which are commonly tracked through the Russell 2000 Index. The index represents the smallest 2,000 companies in the broader Russell 3000, a market-cap-weighted benchmark designed to measure the performance of the U.S. equity market. So far this year, the Russell 2000’s constituents have contributed to a gain of more than 13%. Meanwhile, the S&P 500’s year-to-date (YTD) gain stands at just over 8%.

One reason small caps have outperformed the S&P 500 so far in 2026 is that investors began the year by rotating out of Big Tech names. Massive outflows were fueled by fears of a weakening macro environment, runaway valuations, and concentration risks. Those stocks—including some members of the Magnificent Seven—have performed better lately. Nonetheless, those concerns remain relevant, as do other factors that have served as tailwinds for small-cap stocks.

A valuation gap between smaller companies trading at steep discounts to their S&P 500 counterparts has also been a catalyst. That spread sparked a wave of buying as institutional investors looked to redeploy gains from tech’s run-up and reallocate to undervalued value and growth opportunities in the Russell 2000.

Another major reason small caps have bested the large- and mega-cap market is that smaller companies are often insulated from the geopolitical risks and tariff-related fallout that have created uncertainty for the major indices.

U.S.-domiciled small caps also tend to conduct much of their business domestically. That provides a safeguard against the global supply chain disruptions that have plagued multinational companies and made them far more sensitive to international trade policy.

For investors looking to add small-cap exposure while hedging against the S&P 500’s relative underperformance, the following two exchange-traded funds (ETFs) have delivered strong year-to-date track records and still have several tailwinds at their backs.

The Largest Small-Cap ETF Zeroes in on Growth

With nearly $100 billion in assets under management (AUM), the iShares Core S&P Small-Cap ETF (NYSEARCA: IJR)—formerly the iShares S&P SmallCap 600 Index Fund—is the world’s largest small-cap fund.

The ETF has a focus on growth stocks and holds around 650 companies, with a tilt toward financials, which make up nearly 22% of the fund by sector exposure. Consumer discretionary, industrials, and tech together account for around 43%, while healthcare rounds out the top five sectors by weight, with an allocation of more than 10%.

The IJR has performed particularly well this year, which can be attributed in part to its more than 10% combined industry exposure to semiconductors and semiconductor equipment as well as oil, gas, and consumable fuel. So far this year, the ETF has gained around 13%.

After institutional selling outpaced buying in Q4 2025, the fund has seen a reversal in early 2026. During Q1, inflows of $849 million surpassed outflows of just $285 million. Alongside institutional ownership of nearly 67% and current short interest of just 0.96% of the float, the smart money appears to be bullish on the iShares Core S&P Small-Cap ETF heading into the second half of the year.

This Vanguard Fund Holds a Massive Portfolio of Small Caps

Launched in January 2004, the Vanguard Small-Cap ETF (NYSEARCA: VB) tracks the CRSP U.S. Small Cap Index, which includes the bottom 2% to 15% of the investable universe.

With nearly $75 billion in AUM, it is comparable to the IJR in valuation.

And while the ETF’s YTD gain of around 10% isn’t quite as impressive as the IJR’s, it is still enough to have outperformed the S&P 500 this year.

Where the VB stands out is its sheer broad-based exposure. With 1,315 holdings, more than 18% of the fund’s portfolio is allocated to industrials, nearly 17% to financials, and 15% to tech. Consumer discretionary and healthcare round out the top five sectors at 11.2% and 10.6%, respectively.

Despite its focus on small caps, it carries some big-name holdings. Coherent (NYSE: COHR), for example, is an industry leader in laser manufacturing and photonics-based solutions. The stock, which plays a critical role in AI infrastructure, has generated a YTD gain of more than 84%.

The Vanguard Small-Cap ETF has seen aggressive institutional buying over the past year, with inflows of more than $28 billion easily surpassing outflows of less than $5 billion. The bulk of that buying came in Q4 2025, when $24 billion was injected into the fund against sales totaling just $1.3 billion. Current short interest is negligible at just 0.16% of the float.