How the Unprofitable-Tech Surge Ends
Broadcom sells off... Treasurys lose their 'reserve' status... The latest jobs reports will keep rate cuts on hold... What pricks the bubble in unprofitable tech stocks...
One chipmaker's earnings dragged stocks lower...
Yesterday, after markets closed, Broadcom (AVGO) released its second-quarter earnings. Earnings came in above Wall Street's expectations, but revenue missed the mark.
And looking forward, Broadcom didn't increase its sales forecast for its AI chips. Broadcom still sees AI chip revenue of $100 billion in the 2027 fiscal year. And that wasn't enough for investors.
Many AI chipmakers, like Nvidia (NVDA), are growing at absurd rates and continually raising their forecasts. By failing to follow suit, Broadcom can't keep investors excited.
That's what we saw in the stock's reaction today... Broadcom's shares fell more than 14% overnight, their largest post-earnings decline ever.
You don't have to be a Broadcom investor to take that hit.
Broadcom is the seventh-largest public company in the world by market cap. It makes up more than 3% of the entire Nasdaq 100 Index and has a 7.2% weighting in the VanEck Semiconductor Fund (SMH).
This is where the heavy market concentration in a few names comes back to bite investors...
The Nasdaq 100 fell 0.1% today, while SMH fell more than 1.6%. Still, the S&P 500 Index and the Dow Jones Industrial Average were both up today.
Treasurys are no longer the world's 'reserve' asset...
In a report on Tuesday, the European Central Bank said that gold has replaced U.S. Treasurys as the top reserve asset for global central banks. At the end of 2025, gold made up about 27% of central bank reserves, while Treasurys "only" made up 22%, the ECB said.
Our colleague Chris Igou covered the sagging interest in U.S. Treasurys in Monday's edition of the free DailyWealth e-letter. From Chris...
America's debt is out of control.
The U.S. is running at a roughly $2 trillion annual deficit. The cost of servicing interest has reached $1 trillion a year. This undermines confidence in America's ability to pay its debt in the longer term.
At the same time that America's Federal Reserve is trying to trim U.S. debt from its balance sheet, global central banks are less interested in taking the Fed's place. More from Chris...
Foreign central banks are also big buyers of U.S. Treasurys... but they're losing confidence in these assets, too. Buyers like China and Japan are diversifying away from U.S. bonds.
As we're hearing from the European Central Bank, they're doing that with gold.
That lack of confidence in U.S. Treasurys (and its debt) can be applied to the dollar as well. If countries don't want to hold American debt, they're going to be less inclined to hold U.S. dollars, too.
It's all part of what Dr. David "Doc" Eifrig explains to his Income Intelligence subscribers as "the Great Devaluation." While the Great Devaluation may be bad for Treasurys and the dollar, Doc says it'll also create opportunities.
And one of those opportunities is just what we're seeing from central banks across the world: a shift away from U.S. dollars and debt in favor of gold. As he wrote in the May issue of Income Intelligence...
We already have a few devaluation plays in our portfolio. This month, we're adding another.
We'll turn to a classic hedge against both chaos and inflation: gold.
As Doc said, gold is both a great hedge against "chaos" like the ongoing conflict with Iran, as well as the declining value of the dollar. Central banks know this, and they've been loading up on gold for quite some time.
According to the International Monetary Fund, central banks have been net buyers of gold for 16 of the past 18 months (through April). That's a tailwind for both gold and gold stocks that's not going away anytime soon.
Out of fairness to Doc's paid subscribers, we can't give away the name of the gold stock he recommended. But paid-up Income Intelligence subscribers and Alliance members can read his full analysis and see his stock pick here.
And folks who aren't subscribed to Income Intelligence can learn more about Doc's income-investing newsletter right here.
This week's hiring data points to a strengthening labor market...
On Tuesday, the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey ("JOLTS") showed that companies are looking to hire again. Openings jumped to 7.6 million in April, well above the Wall Street estimate of 6.8 million... hitting the highest level since May 2024.
And those job openings led to more hiring last month...
Yesterday, the monthly hiring data from payroll processor ADP showed that the private sector added 122,000 jobs in May – above the estimate of 110,000 job gains and the most since January 2025.
By ADP's measure, the private sector has added jobs in every month since last June, and those gains have accelerated in the past two months.
ADP Chief Economist Nela Richardson noted that hiring was more "broad-based" than in previous positive months, with eight of the 10 sectors ADP tracks posting job gains in May.
But AI layoffs are still lurking...
In its monthly report, consulting firm Challenger, Gray & Christmas said that companies cited AI as the reason behind 38,579 job cuts in May.
That was the highest-ever monthly total for AI since Challenger began tracking it in 2023, and it represented 40% of all job cuts in the month.
For 2026, AI has now become the largest reason behind planned layoffs. And yet, as Andy Challenger, the company's chief revenue officer, said in the monthly report...
AI isn't yet the jobpocalypse some predicted. Like spreadsheets and email before it, the technology will ultimately make workers more productive, but our data shows companies are already acting on it, citing AI for more cuts than any other reason.
He added that while the tech sector has had the most layoff announcements this year, it's also the sector with the most hiring plans this year.
So while AI may be the labor market's scapegoat at the moment, it could also be a huge tailwind.
What's good for the labor market is bad for rate cuts...
With the labor market on more solid footing than it was last year, the Fed has stayed away from further interest-rate cuts. And even with the threat of AI, employers are still hiring.
That's turning the Fed's focus back toward the other half of its twin mandate: inflation. In a speech on Tuesday, Cleveland Fed President Beth Hammack said exactly that. From her speech to the City Club of Cleveland...
Based on the data, I'm more concerned about the growing risks of persistently elevated inflation than the risks to full employment and also that monetary policy may not be sufficiently restrictive to bring inflation down to 2 percent.
The market agrees... The 10-year Treasury yield has come down off its crisis-level highs from last month, though it still remains higher than any point going back to last July.
And CME's FedWatch tool shows that traders are bracing for a higher probability of rate hikes later this year, with the December meeting priced in as the first of the next rate cycle. In fact, based on how investors are positioned, the markets think three rate hikes are just as likely as a single rate cut.
Higher interest rates ripple their way through the economy to fight inflation. But they also make it harder for unprofitable companies to borrow to fuel their growth.
That would be particularly challenging for the technology sector...
Right now, money-losing tech stocks are having their day in the sun...
Over the past 12 months, Goldman Sachs' Non-Profitable Technology Index has roughly tripled. And it's approaching its 2021 high... from just before the last time the Fed raised interest rates.
Amid the rate hikes that began in 2022, the Non-Profitable Technology Index crashed more than 60%. We'd expect no different during the next hiking cycle.
If December does mark the first rate hike of the Fed's next cycle, it may be the "prick" in the unprofitable-stock bubble.
That's why we've continually said to build your portfolio full of capital-efficient companies with longstanding businesses (the type that have survived multiple hiking and cutting cycles)... and, of course, hard assets like gold.
New 52-week highs (as of 6/3/26): Applied Materials (AMAT), Advanced Micro Devices (AMD), Arm Holdings (ARM), ASML (ASML), DigitalOcean (DOCN), Exelixis (EXEL), W.W. Grainger (GWW), Illumina (ILMN), Marathon Petroleum (MPC), Ormat Technologies (ORA), Ryder System (R), Tenaris (TS), Twist Bioscience (TWST), and State Street SPDR S&P Semiconductor Fund (XSD).
A quiet mailbag today, but we do want to make a note to remind you about our Stansberry Venture Technology editor Dave Lashmet's brand-new free presentation that went live this morning...
If you're thinking about touching a share of SpaceX's upcoming IPO, you should really hear what Dave has to say first...
It's all about "Project Blackjack," which involves a technology Dave says is 10 times better than SpaceX's most profitable business... and a little-known company positioned to deliver 1,000% gains to shareholders.
Maybe this sounds outlandish... But consider that over the years, Dave has given his subscribers 50 different chances to make double, triple, or 10 times their money... He recommended Nvidia (NVDA) when it traded for a split-adjusted $11 per share back in 2016...
And Dave doesn't do this kind of thing very often... What he's saying now represents his first public call like this in four years. And, as you'll hear, another one may never come around again...
So check it out. You'll hear many more details, including all the places Dave is looking to find winners in the "space race." If you missed the debut of his presentation this morning, you can watch a replay here.
All the best,
Nick Koziol
Baltimore, Maryland
June 4, 2026