Stephanie Link — Market Setup for the 2nd Half: Strong Economy, Broadening Earnings

When a whole sector sells off in one day, the highest-quality companies in it get dragged down with the weak ones — even though nothing actually changed about their business. Link's discipline is to use that to buy "best-in-class" names cheaper. Starbucks is her example in consumer-discretionary: a dominant, recognizable franchise she'd add on the dislocation, because her bigger bet is that the consumer keeps spending (jobs, wages and incomes are all holding up).

Dick's is the largest national sporting-goods retailer and Link's other "buy the best-in-class name on the selloff" pick. The logic is the same as Starbucks: discretionary stocks got hit hard today as a group, so she wants the quality leader at the lower price rather than chasing the names that deserve to be down.

After the Mag-7 pullback, Link thinks the prices finally make sense relative to how fast these businesses grow. Microsoft trades at about 22 times earnings while its cloud arm, Azure, has been growing 38–40% — fast growth for a fairly modest multiple. The "multiple" (P/E) is just how many dollars you pay for each dollar of annual profit; paying 22 for that growth rate is the bargain she's pointing at.

Her caution applies to the whole group: the bigger risk isn't shrinking profit margins, it's "free-cash-flow burn" — these firms are spending so heavily building AI data centers that the cash left over after spending can actually go negative this year, and you won't see the usual benefit of revenue growing faster than costs ("operating leverage") until the spending cycle eases.

Same screen as Microsoft. Amazon trades around 24 times earnings while AWS, its cloud-computing business, grew 28% last quarter. Link sees that as a reasonable price for the growth you're buying. The same group-wide warning holds — heavy AI build-out spending means free cash flow can turn negative and margins won't expand much until the investment wave slows.

Alphabet is the cheapest-looking of the three on Link's growth-vs-price test: about 24 times earnings while Google Cloud grew 63% — the fastest cloud grower of the bunch. It's also being added to the Dow. Her read is that you're paying a similar multiple to Amazon for noticeably faster cloud growth, with the same caveat about the cash being plowed into the AI build-out.

Marvell designs specialized chips for data centers — including the high-speed "optical" parts that move data between AI servers and the "custom ASICs" (chips built to order for one customer, like a hyperscaler's in-house AI processor). Link owns it as one of just two semiconductors she holds, and values it on what it can earn down the road: about $10 of earnings power by 2027. The supporting facts she cites — Nvidia putting $2 billion into the company, a $2 billion buyback (the company buying back its own shares), an optical business that can grow 50% for a couple of years, and a custom-chip business that could grow 20–100% (it shares ~80% of that market with Broadcom).

At 27 times earnings she admits it isn't cheap, so her plan is patient: "I'd buy a bigger dip" — wait for a deeper pullback rather than chase it here.

Broadcom is Link's second semiconductor holding and the one she's actively adding to. It makes the same kind of custom AI chips and networking gear as Marvell (the two dominate that custom-chip niche). She frames it on earnings power of about $20 a share, and notes the stock "hasn't done as well" as Marvell — so it's the relative laggard, which is exactly why she's buying more of it rather than the better-performed name.

IBM is Link's single favorite idea here (her "final trade") and the cleanest example of her software call. With chip stocks up 85% this year and software stocks down 17%, she argues the value has shifted to software — but only the "mission-critical" kind that big customers can't rip out. IBM fits: it's down 18% from its highs and trades at roughly 18 times earnings, which she sees as cheap for software that enterprises depend on. Lower price, essential product — that's the setup she wants.

Snowflake runs the "data cloud" — software companies use to store and analyze huge amounts of data, increasingly to feed AI. Link lists it alongside IBM and Synopsys as an out-of-favor, mission-critical software name. The pitch isn't about Snowflake specifically so much as the category: with software badly lagging chips this year, she's hunting in the names whose product is hard to replace.

Synopsys sells the design software (called EDA) that chip companies use to actually design their chips — the semiconductor industry literally can't make modern chips without it. That makes it a clever back-door way to play the chip boom: instead of buying the chip stocks that are already up 85%, you buy the essential software that's been left behind and is cheaper. It's the definition of the "mission-critical software" Link wants.

Palo Alto is a cybersecurity company, and Link owns it and CrowdStrike but clearly prefers Palo Alto. It's up 78% this year off its early-2026 lows and is "firing on all cylinders" — revenue and subscription revenue both up 31%, and RPO (remaining performance obligations — contracts already signed but not yet recognized as revenue, a sign of future growth) up 36%. It has also made more than $30 billion of acquisitions whose benefits haven't shown up yet, plus "platformization" (getting customers to buy its whole security suite rather than one product) just getting going.

Her reason to favor it over CrowdStrike is valuation: Palo Alto trades at about 22 times its sales versus CrowdStrike at 35 times. "Price-to-sales" compares the stock price to revenue — a quick yardstick for fast-growing companies that don't yet have much profit. Cheaper on that measure, and executing, so it wins.

Meta is the one Mag-7 stock Link is uneasy about even though she owns it ("unfortunately I own it"). Unlike the others, she says it has real things to prove on growth and on "monetization" — turning its products and its heavy AI spending into actual revenue. It's also the name she uses to make her group-wide point: the worry isn't just thinner margins, it's that the cash these companies generate is being entirely consumed by AI build-out spending, so don't expect the usual profit leverage until that cycle cools.

CrowdStrike is the other cybersecurity name Link holds, but it's her second choice behind Palo Alto. The reason is purely price: CrowdStrike trades at 35 times sales versus Palo Alto's ~22, so for similar exposure she'd rather add the cheaper one. She's keeping CrowdStrike, but it's a hold here, not a name she's adding.