February 13, 2026

In the Loop – February 13, 2026

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

Joe Kernen asked Co-Founder of Sun Microsystems, Scott McNealy on CNBC…Can there be multiple Trillion Dollar companies? Scott answers, “As long as we keep devaluing the Dollar, the numbers will always be bigger.” I loved that answer!

Perceived Threats of Innovation

One of the more important developments this week has been the growing recognition that artificial intelligence is no longer just a growth story for a handful of large technology leaders, but a broad source of disruption across multiple industries. Investors have become more focused on rising capital spending, pressure on free cash flow, and the shift from asset-light to more capital-intensive business models at companies like Microsoft, Alphabet, and Amazon, while continued strength in Nvidia highlights how uneven the benefits of AI adoption can be. At the same time, AI-driven automation and software tools are reshaping areas such as customer service, marketing, software development, healthcare analytics, and industrial design, often putting pressure on legacy business models. This has led to more selective “disruption trades,” with investors rotating away from companies seen as vulnerable and toward those best positioned to adapt. While this transition is creating short-term volatility and uncertainty, it is also laying the groundwork for meaningful long-term opportunity as more productive, scalable, and innovative business models emerge across the economy.

Jobs Report

Markets got off to a strong start following a better-than-expected January jobs report, which showed the U.S. economy added approximately 130,000 jobs and the unemployment rate dipped to 4.3%. These figures came ahead of expectations and reinforced the view that economic activity remains resilient despite last year’s slowdown. Stocks initially moved higher as investors welcomed signs of steady hiring and consumer stability. As the day progressed, however, enthusiasm moderated. Stronger labor data reduced the likelihood of near-term interest-rate cuts, pushing Treasury yields higher and tempering equity gains. The result was a familiar pattern: encouraging economic news, followed by more cautious trading as markets balanced economic strength against tighter financial conditions.

Quarterly Earnings Update

Earnings season has remained busy this quarter, with roughly 70% of the S&P 500 now having reported results and blended earnings growth tracking near 13%, about 400 basis points better than expectations. More than three-quarters of companies have exceeded profit estimates, reflecting resilient demand, disciplined cost controls, and improving operating leverage across technology, industrials, and select financial and consumer sectors. Revenue growth has also been coming in ahead of forecasts, reinforcing the view that corporate fundamentals remain on solid footing. Several companies have been rewarded with strong post-earnings gains, including Vertiv Holdings, which rallied following better-than-expected results and upbeat guidance tied to continued data center and AI infrastructure demand. Overall, earnings trends continue to provide important support for equities, even as investors balance solid corporate performance against higher interest rates.

Notable Market Rotation this Week
The shift away from Growth and into the Traditional Value sectors can be seen by sector performance below. Traditional defensive sectors are Energy, Staples, Utilities and Healthcare. It is too early to tell if this trend will continue, but worth watching.
S&P 500 Sector Performance
  • Outperformers: Energy +2.59%, Consumer Spls. +1.40%, Materials +1.30%, Utilities +0.87%, Healthcare +0.60%, Industrials +0.51%, Tech +0.21%, Real Estate +0.05%
  • Underperformers: Financials (1.49%), Communication Svcs. (1.31%), Consumer Disc. (0.55%)
Follow the Money

Whether the companies typically fall into Growth or Value buckets, it seems logical to us that if we follow where the $700 Billion of new announced Capital Spending in 2026 ends up, that would be a good place to start.

Individual Company Updates

Vertiv Holdings (VRT)

Vertiv continues to benefit from surging AI-driven data center investment, with strong demand for power management, cooling, and infrastructure solutions. Orders and backlog remain elevated as hyperscalers and enterprises expand capacity. The company’s focus on liquid cooling, high-density power systems, and modular data center solutions positions it as a critical enabler of next-generation AI facilities, supporting multi-year revenue and margin expansion.

Arista Networks (ANET)

Arista remains a key beneficiary of cloud and AI networking upgrades, driven by hyperscaler spending on high-speed Ethernet and data center switching. The company continues to gain share with its scalable, software-driven networking platforms and strong exposure to AI cluster buildouts. Robust demand visibility and disciplined cost control support Arista’s outlook for sustained revenue growth and industry-leading margins.

Vistra (VST)

Vistra is emerging as a major beneficiary of rising power demand from AI data centers and electrification trends. The company’s diversified generation portfolio, including gas, nuclear, and renewables, positions it to supply reliable baseload and flexible capacity to hyperscalers. Long-term power purchase agreements and improving market pricing continue to support strong cash flow and shareholder returns.

Deere & Company (DE)

Deere continues to navigate a cyclical slowdown in global agriculture while investing aggressively in precision farming and automation. Despite softer equipment demand, the company’s strong aftermarket business, pricing discipline, and leadership in digital agriculture support resilient profitability. Over the long term, Deere’s technology-driven productivity solutions and exposure to global food security trends position it for renewed growth as farm economics normalize.

Alphabet (GOOGL)

Alphabet delivered another exceptional quarter in Q4 2025, beating expectations on both revenue and earnings as its AI-driven growth strategy gained momentum. Revenue rose 18% year over year to a record $113.8 billion, while EPS jumped more than 31% to $2.82. Core Google Services remained strong, with Search revenue up 17%, easing concerns about AI disrupting its advertising model. Google Cloud was the standout, surging 48% with operating margins expanding to 30%, supported by accelerating enterprise AI demand and a rapidly growing $240 billion backlog. For full-year 2025, revenue surpassed $400 billion for the first time, and net income rose 32%. Looking ahead, Alphabet plans a massive $175–185 billion in 2026 capex to expand AI infrastructure, funded by strong cash flows and low-cost borrowing, positioning the company as a long-term AI leader.

Amazon (AMZN)

Amazon posted solid Q4 and full-year 2025 results, highlighted by accelerating AWS growth and expanding operating margins, though heavy AI investment pressured free cash flow. Q4 revenue rose 14% to $213.4 billion, while operating income climbed to $25.0 billion. AWS sales grew 24% to $35.6 billion, reaching a $142 billion annual run rate, with margins expanding to 35%. The company’s custom silicon and Bedrock AI platform both achieved multi-billion-dollar run rates, signaling improving returns on AI spending. However, Amazon’s planned $200 billion capex program for 2026 has raised concerns about near-term cash flow, with analysts projecting negative free cash flow. While fundamentals remain strong, investor sentiment has been volatile as markets weigh long-term AI opportunity against short-term financing pressure.

We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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Formidable Asset Management (“Massey Romans Capital”) is an investment adviser registered under the Investment Advisers Act of 1940. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, the Firm cannot guarantee the accuracy of the information received from third parties.

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