PANW at 90x Earnings and AVGO Targeting $120B AI Revenue: Buy or Run?

This week's earnings calendar is basically a Rorschach test for your risk tolerance. Two big tech names report, both flying the AI flag, and yet they tell completely different stories about where we are in this market cycle. Let's break it down.

$PANW reports Tuesday with analysts penciling in 30% year-over-year revenue growth, which sounds great until you look at the price tag. The stock has nearly doubled year-to-date and now trades at over 90 times forward earnings. That is not a typo. Ninety. Bloomberg Podcasts flagged this directly, noting that cybersecurity stocks have broadly shifted from being priced on growth to being priced on perfection. There is a difference. At 90x, Palo Alto needs to not just beat expectations, it needs to retire them. Any guidance wobble and this thing reprices fast.

$AVGO is a different animal. Broadcom reports Wednesday with AI chip revenue expectations sitting around $16 billion for the quarter, which on its own sounds fine. But here is the number that actually matters: analysts are projecting $120 billion in AI chip revenue next year, implying roughly six-fold growth over two years. Six-fold. If even half of that materializes, the current valuation looks reasonable. The bull case for Broadcom is not hype, it is math tied to hyperscaler capex commitments that are already public.

Zoom out and the broader market picture looks equally bipolar. TheChartGuys flagged markets sitting in a choppy, balanced range as August closes, with the NASDAQ trying to hold a weekly higher low after a significant pullback. Meanwhile, Fed Chair Kevin Warsh's hawkish Jackson Hole speech essentially cancelled the prior week's risk-on rally in a single afternoon. Metals sold off. Crypto sold off. Small caps got hit. Software (tracked via IGV) was the only sector that held up, emerging as the lead bull sector of the week.

The macro backdrop is not helping sentiment either. Warsh has made it clear that with PCE inflation running at 3.7%, partly driven by energy costs and AI-related demand, the Fed is not done. Barclays has already formally changed its call to expect two quarter-point hikes, September and December. That is the kind of environment where 90x multiples go to die, and where companies with genuine forward revenue visibility, like Broadcom, start to look a lot more interesting by comparison.

Software holding while everything else sold off on a hawkish Fed signal is a tell worth watching. When the market gets scared and still bids up your sector, that is not noise, that is a message.