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Fabrinet’s Sell-Off May Prove It Is One of AI’s Most Misunderstood Stocks
Author: Thomas Hughes. Article Posted: 8/18/2026.
Key Points
- Fabrinet’s post-earnings drop may have more to do with investor caution than a weak fundamental story.
- The company remains tied to AI infrastructure demand through advanced optical packaging and precision manufacturing.
- Heavy spending and customer concentration are risks, but analysts still see room for the stock to recover.
- Special Report: Forget SpaceX. Buy the company Musk can't replace.
When fundamentals are strong, as they are for Fabrinet (NYSE: FN), and the market sells the news, investors may be looking at a classic buy-the-dip setup. Fabrinet plays an important role in AI infrastructure through its advanced optical packaging solutions. Its results are outperforming expectations, and its guidance was solid.
Given the current trends, Fabrinet’s guidance may prove cautious, as it also reflects systemwide capacity constraints that the industry is actively working to overcome. If not in the upcoming quarter, then perhaps soon afterward, Fabrinet’s results could accelerate unexpectedly along with the broader AI industry.
Fabrinet Among a Group of Widely Misunderstood AI-Critical Stocks
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Click here to learn this company's name for free todayThe primary cause of Fabrinet’s post-release plunge appears to be market angst. Although the Q4 fiscal year 2026 (FY2026) results were strong, they included heavy capital expenditures (CapEx), which weighed on GAAP results. The caveat for investors is that Fabrinet is a critical component of the AI supply chain, and its spending is backed by demand. This is not a start-up trying to ramp production; it is an established cog in the AI machine, growing alongside the industry. The bull case is clear, although timing remains the key question.
As it stands, leading semiconductor foundry Taiwan Semiconductor Manufacturing Company (NYSE: TSM) is struggling to keep up with demand. The company is expanding existing facilities while building new ones, and much of what it produces is routed to Fabrinet’s facilities for advanced optical packaging. The market may be underestimating how systemically entrenched Fabrinet is in NVIDIA’s manufacturing process and how firmly it owns its niche in the expanding ecosystem. With NVIDIA’s (NASDAQ: NVDA) sales ramping and next-generation products moving through the pipeline, investors have reason to expect TSMC’s and Fabrinet’s revenue and earnings power to remain robust well into the future.
Fabrinet Plunges on a Beat-and-Raise Quarter
Fabrinet posted a strong Q4 FY2026, with revenue rising more than 45% to over $1.3 billion. That marked a company record, supported by margin strength and results well above forecasts. The top line exceeded MarketBeat’s consensus estimate by $40 million, or about 310 basis points, and is expected to remain strong in the coming quarters. Margins, the critical detail, expanded at all levels, driving an approximate 56% increase in adjusted net income and a 55% increase in adjusted earnings. Adjusted earnings per share (EPS) came in at $4.10, or 29 cents above expectations.
Guidance is equally strong and points to a solid year. At the low end of its range, Q1 FY2027 revenue and earnings guidance exceeds analysts’ consensus estimates by a wide margin, setting the stage for continued outperformance through the end of the fiscal year. In this environment, analysts may have to adjust their forecasts to match, and the bullish sentiment cycle could continue well into the next fiscal year.
Analysts initially sold the news, citing concerns about spending and the shift to negative cash flow. However, that spending reflects expanded capacity and production ramps for AI-critical components, making it a bullish factor in this thesis. While near-term headwinds remain, spending could eventually normalize as revenue grows, leading to significantly improved margins and a return to free cash flow. Until then, analysts rate the stock as a consensus Moderate Buy. The data shows a 50% Buy-side bias and no sell ratings. Price targets suggest fair value is near $645, well below the all-time high, but the stock could trend higher over the coming quarters as capacity ramps and backlogs are realized.
Fabrinet: Limited Downside With Unknown Upside Potential
Fabrinet’s upside potential is unknown because the market has yet to see a top for the AI boom. Fears persist, but NVIDIA CEO Jensen Huang has been de-risking the outlook, paving the way for financing and reduced investor risk across the broader AI industry. If NVIDIA’s business remains secure and GPUs continue to roll off the shelves, advanced packaging and other GPU-adjacent businesses should remain strong as well.
Institutional support suggests that the downside is limited. The group owns more than 95% of the stock and has been accumulating shares throughout 2026. More importantly, activity ramped up in early Q3, ahead of the release, coinciding with a robust rebound in the stock price. Institutions are likely to continue buying and may accelerate their activity given the mid-August price discount. The key technical factor investors and traders should watch is the MACD’s convergence with the existing high, which suggests a high probability that fresh highs will be set over time.
The company’s biggest risk is extreme customer concentration, with NVIDIA and Cisco (NASDAQ: CSCO) accounting for nearly half of its revenue. Any changes in production, product design or AI demand—positive or negative—will be reflected in the stock’s price. The next visible catalyst is NVIDIA’s Q2 FY2027 earnings release, scheduled for late August.
Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding
Author: Leo Miller. Article Posted: 8/25/2026.
Key Points
- Berkshire Hathaway’s latest portfolio filing shows a roughly $299 billion equity portfolio following another quarter of notable buying and selling.
- Alphabet was the standout move, with Berkshire increasing its combined position by more than 80% and making it its third-largest reported holding.
- Berkshire also increased its exposure to homebuilders while exiting Constellation Brands and sharply reducing several financial, steel and consumer holdings.
- Special Report: Forget SpaceX. Buy the company Musk can't replace.
One of the world’s most closely watched investment firms, Berkshire Hathaway, is back in the news after releasing its latest round of portfolio updates.
The company’s legendary longtime leader, Warren Buffett, stepped down as CEO at the end of 2025, with Greg Abel taking over on Jan. 1, 2026. Buffett remains Berkshire’s chairman, making this the second quarterly portfolio update since the leadership transition.
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Watch Marc Chaikin's free presentation and get his full buy-and-sell list todayBerkshire overhauled its portfolio significantly in Q1, drastically reducing its number of holdings and selling out of many positions.
While the changes in Q2 were not nearly as dramatic, Berkshire clearly indicated where it sees opportunities in the market.
Berkshire Doubles Down on Alphabet
Berkshire’s most notable move in Q2 did not involve initiating a new position or exiting a holding. Instead, it added substantially to one of its biggest bets. During the quarter, Berkshire massively increased its position in Magnificent Seven giant and AI hyperscaler Alphabet (NASDAQ: GOOGL).
Combining Alphabet’s Class A and Class C shares, Berkshire now owns approximately 106 million shares of the company. That compares with just under 58 million shares in Q1, marking an 83% increase in a single quarter. As of the end of Q2, Berkshire’s Alphabet position was worth a whopping $37.8 billion. It accounted for 12.6% of Berkshire’s portfolio, making Alphabet its third-largest holding. That represents a significant rise from Q1, when Alphabet was Berkshire’s seventh-largest holding.
Clearly, Berkshire has developed significant conviction in Alphabet, which remains the only major AI hyperscaler represented in its reported equity portfolio. There is certainly reason for optimism about Alphabet’s position in the AI race, particularly because of the soaring growth at Google Cloud.
Last quarter, cloud revenue increased 82% year over year (YOY), driven by strong demand for AI infrastructure and solutions. This figure surpassed the growth of Microsoft’s (NASDAQ: MSFT) Azure cloud and Amazon.com’s (NASDAQ: AMZN) AWS by a wide margin. Those businesses grew by 43% YOY and 36.7% YOY, respectively.
While this is a strong positive indicator for Alphabet’s AI future, not everything at the company is going well. There is a general belief that its Gemini model is falling behind ChatGPT and Claude. Notably, Alphabet has delayed the release of Gemini 3.5 Pro because of poor performance, heightening concerns.
Berkshire Adds to Homebuilders, Cuts Key Names Across Finance, Steel and Staples
Berkshire also made a clear move in another key area of the stock market in Q2: homebuilders. The company significantly increased its position in Lennar (NYSE: LEN), one of the country’s top homebuilders. Berkshire increased its combined position in Lennar’s two share classes by just under 30%, bringing its total to 13.4 million shares. The position is now worth approximately $1.2 billion.
Homebuilding giant D.R. Horton (NYSE: DHI) was also Berkshire’s only new holding during Q2, although the position is extremely small at just $580,000. The company also has a $75.7 million position in homebuilder NVR (NYSE: NVR), although that position was unchanged during the quarter.
These moves are interesting considering that homebuilders have struggled significantly for some time. Notably, all three names are in the red over the past 52 weeks, with Lennar down more than 30%.
Lennar’s revenue growth has been negative for five consecutive quarters, although its 5.2% revenue decline in Q2 was a significant improvement from the 13.3% decline in Q1. Additionally, the company’s orders came in near the high end of its guidance, a positive forward-looking indicator.
It is possible that Berkshire believes Lennar is beginning to bottom out as some financial metrics improve. However, it is important to note that Berkshire is not making a bet large enough to substantially hurt its overall portfolio performance. Its Lennar position represents only around 0.4% of the company’s portfolio.
On the other hand, Berkshire has abandoned ship when it comes to Mexican beer giant Constellation Brands (NYSE: STZ). The firm sold out of the position in Q2 after reducing its share count by 95% in Q1. Constellation has failed to stage much of a recovery from its 2026 lows, with beer sales coming under significant pressure.
Berkshire also made large cuts to its positions in big names such as Capital One Financial (NYSE: COF), Nucor (NYSE: NUE) and Kroger (NYSE: KR). Its holdings in those companies fell by 58%, 52% and 22%, respectively.
Berkshire’s Hyperscaler Bet Still Has Much to Prove
Alphabet remains the biggest story among Berkshire’s recent portfolio moves, while its other top holdings are long-held positions. Looking ahead, growth in Google Cloud will be the biggest factor to watch, as much of the company’s AI-related revenue comes from this segment.
Cloud revenue was $24.8 billion last quarter, or just under a $100 billion annualized run rate. That figure includes a significant amount of non-AI revenue. Yet, the company expects to spend $200 billion on capital expenditures (CapEx) in 2026 at the midpoint.
Thus, while Cloud is growing briskly, Alphabet still has a long way to go to justify its AI spending. Eventually, the company will need AI revenue to surpass its CapEx.
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