While investors obsess over AI chip stocks and semiconductor cycles, one of the most reliable compounding machines in retail quietly posted another standout quarter. Costco Wholesale reported Q3 fiscal 2026 results on May 28, and buried beneath the headline numbers is a story that long-term investors should find genuinely compelling: the membership model is getting stronger, not weaker, even as macroeconomic pressures squeeze consumers everywhere else.

Net sales rose 11.6% year-over-year to $69.15 billion, and net income climbed 15% to $2.19 billion — or $4.93 per diluted share. But the detail that stands out is gas. Costco reported record-breaking gas volumes in the quarter, with members filling up more frequently as the Iran conflict pushed fuel prices higher. The CFO noted that members were topping off vehicles more frequently because of concern about future gas prices. That behavioral shift — using Costco as a hedge against price spikes — is exactly the kind of sticky, habitual behavior that cements long-term member loyalty. Gas is a loss-leader, but it is also a magnet that drives warehouse visits and incremental spend.

The membership metrics themselves tell a deeper story. Paid memberships grew 4.1% to 82.9 million, with paid executive memberships — the higher-tier, higher-fee option — surging 9.6% to 41.2 million. The worldwide renewal rate held at 89.7%, and in the U.S. and Canada it was an extraordinary 92.2%. Membership fee income rose 10.7% to $1.373 billion. That figure is not just revenue — it is a near-pure-profit annuity stream that funds Costco’s ability to undercut competitors on price and keep members locked in. The September 2024 fee increase alone accounted for more than a quarter of that membership income growth, with minimal churn to show for it.

What makes this quarter worth studying is not the magnitude of the beat but the durability of the underlying model. In an environment where discount retailers are warning of shifting consumer sentiment, Costco’s comparable sales grew 9.8% — or 6.6% stripping out gasoline inflation and foreign exchange. The warehouse model, which requires members to pay for the privilege of shopping, creates a psychological contract that most retailers can only dream about. Members feel compelled to shop enough to justify the fee.

For patient investors, the question is never whether Costco is a great business — it demonstrably is. The question is valuation, and Costco has always carried a premium that tests conviction. But each quarter that demonstrates widening membership renewal rates, accelerating executive tier upgrades, and behavioral stickiness even in inflationary environments is a quarter that reinforces the thesis. Durable businesses with pricing power and habitual customer relationships tend to look expensive right up until they dont.

There is a peculiar problem happening on Wall Street right now: Marvell Technology has been raising its own revenue guidance three times in under six months, its stock has more than doubled year-to-date in 2026, and the average analyst price target still sits roughly 24% below where shares are currently trading. When a company outruns its own coverage, something interesting is happening beneath the surface.

Marvell (NASDAQ: MRVL) is not a household name, but it quietly occupies one of the most strategic positions in the AI infrastructure buildout. The company designs custom silicon chips called XPUs for major hyperscalers, along with the high-speed optical interconnects and networking hardware that allow massive data centers to move data without bottlenecks. Put simply: every AI cluster that gets built needs Marvell’s plumbing. That positioning is showing up in the numbers. Data center revenue hit $6 billion in fiscal 2026, up 46% year-over-year, and now accounts for 74% of total company revenue. Fiscal 2027 data center revenue is expected to grow another 40% — a guidance figure that itself was revised upward from 30% just three months earlier.

The catalyst that crystallized the bull case arrived in late March, when Nvidia announced a $2 billion investment in Marvell and integrated the company into its NVLink Fusion ecosystem — a rack-scale platform that allows hyperscalers to build semi-custom AI infrastructure fully compatible with Nvidia’s software stack. When the dominant force in AI chips decides to back a supplier with a multibillion-dollar check, it is worth paying attention. Stifel analysts subsequently raised their price target to $210 (a Street high), Citi lifted to $215, and Bank of America moved to $200. Yet consensus targets as a group have not fully caught up to where the stock is trading — a sign that models and earnings estimates are still being revised in real time.

For long-term investors, the Marvell thesis rests on three compounding engines. First, the interconnect business — where Marvell leads in the chip architecture powering 800-gigabit and 1.6-terabit optical transceivers — is expected to grow more than 50% this fiscal year, with all five major U.S. hyperscalers set to receive Marvell modules. Second, the custom silicon business is expected to at least double in fiscal 2028, led by a second major hyperscaler program ramping into high-volume production. Third, the recent Celestial AI acquisition added co-packaged optics capabilities with a clear milestone: $500 million annualized revenue by late 2027, doubling again by 2028.

The honest valuation debate is real: Marvell trades at roughly 44x NTM EV/EBITDA, well above Broadcom at 25x and Nvidia at 17x. That premium demands flawless execution across every product line. If any one thread slips, the stock faces multiple compression. But the bear case ignores something important — CEO Matt Murphy has raised full-year guidance three consecutive times in under six months, each time citing accelerating bookings, not aspirational projections. Management guided fiscal 2028 total revenue toward $15 billion and non-GAAP EPS of well over $5, explicitly noting the outlook is based on demand seen now and designs already in execution. Patient investors know the difference between a company pricing in hope and one pricing in backlog.

Q1 fiscal 2027 earnings arrive today after the close. The street expects $2.4 billion in revenue and EPS around $0.74 to $0.84. Marvell has beaten estimates in each of the last four quarters. Whether the stock reacts favorably or not in the short term, the underlying story — a fabless chip company that has secured a structural position in AI infrastructure while compounding its revenue guidance upward — is exactly the kind of business that long-term investors tend to look back on and wish they had understood earlier.

For years, the AI investment narrative centered on one thing: GPUs. Nvidia became the poster child of the boom, and for good reason — training large language models is enormously GPU-intensive. But a shift is quietly underway, and Arm Holdings is at the center of it.

Bernstein this week published a market note arguing that Arm stands at the beginning of a CPU renaissance driven by agentic AI. The distinction matters. Chatbots run inference in bursts. AI agents — the kind that take multi-step actions, browse the web, write code, and orchestrate other tools — run continuously. That changes the compute profile entirely. Continuous, low-latency workloads favor power-efficient architectures, and Arm’s CPU designs are unrivaled there.

Bernstein projects that Arm could capture a fourfold increase in server CPU market share over the next four years, growing its addressable market to $137 billion. The firm also sees a path to five times current profitability by 2030. That’s not a moonshot number — it’s a compound growth thesis built on the structural shift from chatbot to agent.

The latest earnings give that thesis real footing. In Q4 FY2026, Arm reported a 49% jump in net income to $313 million, with revenue rising 20% to $1.49 billion. For Q1 FY2027, guidance calls for $1.26 billion in revenue — another ~20% year-over-year gain. This isn’t a company waiting for the future to arrive.

What makes Arm particularly interesting for long-term investors is its business model. Arm doesn’t manufacture chips — it licenses its chip architecture to semiconductor companies and device makers worldwide. Apple, Qualcomm, Amazon, and virtually every major chip designer uses Arm’s IP. Every time one of those companies ships a chip, Arm collects royalties. As AI agents proliferate across smartphones, data centers, and edge devices, the royalty stream compounds quietly in the background.

The stock has surged 46% in a week on the back of the Bernstein note and earnings — which means the near-term trade is probably not the point. The more interesting question for patient investors is whether the 5x profit thesis plays out over the next four years. If AI agents become as ubiquitous as smartphones — and there are real reasons to think they will — Arm’s royalty model could be one of the most durable compounding machines in tech.

Not every AI winner has “AI” in its name. Sometimes it’s the company collecting tolls on the road everyone else is building.

When markets get chaotic, most investors lose sleep. CME Group makes money.

The world’s largest derivatives exchange operator just posted record revenue of $1.9 billion in Q1 2026 — up 14% from the prior year — while the rest of Wall Street was navigating tariff uncertainty, Middle East tensions, and a rattled bond market. Average daily trading volume hit an all-time high of 36.2 million contracts, a 22% surge from Q1 2025. Net income jumped 21% to $1.15 billion, with an operating margin of 69.7%. Not many businesses in America generate seven-in-ten revenue dollars as operating profit.

The reason is structural. CME operates the exchanges where the world hedges its risks — futures and options on interest rates, equity indexes, currencies, commodities, and energy. Every time a pension fund wants to lock in a rate, a multinational wants to hedge its currency exposure, or an oil company wants to price its production forward, they pay CME a toll. The company doesn’t pick winners or losers in the underlying markets. It collects fees whether prices go up or down. And when volatility spikes — which it has been doing reliably in 2026 — volumes rise and so does revenue.

CEO Terry Duffy has called this environment “the need for risk management at unprecedented scale,” and the numbers back him up. Clearing and transaction fees climbed 15% to $1.54 billion. Market data revenue hit a record $224 million. These aren’t one-time tailwinds — they reflect a world that is structurally more uncertain than it was a decade ago. Geopolitical fragmentation, persistent inflation, and AI-driven volatility aren’t going away. If anything, they compound over time, which means the demand for hedging instruments — and the fees CME collects on them — has a structural tailwind beneath it.

For long-term investors, CME has the kind of moat that doesn’t erode easily. Exchange networks become more valuable as more participants join. Liquidity begets liquidity. Switching costs are enormous — a trader or institution that has built its hedging workflow around CME’s contracts doesn’t just wake up one morning and migrate to a competitor. The stock has gained nearly 10% over the past 52 weeks even as much of the market has been choppy, and shares closed at $305 on May 18.

The patient investor takeaway: businesses that profit from volatility rather than suffer from it are rare. CME is one of the cleanest examples in public markets — a toll road on global financial risk, with a 69% operating margin and a customer base that grows every time the world gets more complicated.

Greg Abel’s first quarter as Berkshire Hathaway CEO sent a clear message: the new era has arrived. The Q1 2026 13F filing, released May 15, reveals a sweeping portfolio reshuffle that unwound roughly $14 billion in positions and made one headline-grabbing new bet — a $2.65 billion stake in Delta Air Lines.

That last move is the most symbolic. Warren Buffett famously sold every airline stock Berkshire owned in May 2020, calling the investment a mistake and vowing to exit the sector entirely. Abel, who took the CEO chair on January 1, has now reversed that decision barely one quarter into his tenure. Berkshire acquired approximately 39.8 million Delta shares, making DAL its 14th-largest holding and giving the conglomerate a 6.1% ownership stake in the airline.

Delta was not the only portfolio pivot. Abel effectively cleaned house on the legacy book assembled by former portfolio manager Todd Combs, liquidating more than a dozen positions including Amazon, UnitedHealth Group, Visa, Mastercard, Constellation Brands, Aon, and Pool. At the same time, Berkshire tripled its position in Alphabet, growing the Google parent stake to roughly $23 billion — a meaningful vote of confidence in the company’s long-term competitive moat.

The net result: Berkshire sold $24 billion in stocks while buying $16 billion, becoming a net seller by $8 billion for the quarter. Its cash pile swelled to a record $397 billion.

For long-term investors, the real takeaway is not the Delta bet itself — it is what Abel’s moves signal about Berkshire’s evolving philosophy. The old portfolio had grown cluttered with positions that did not reflect a consistent thesis. Abel appears to be simplifying, concentrating, and making his own calls. Doubling down on Alphabet while reversing Buffett’s airline exit suggests a manager who wants cleaner, more intentional exposure to dominant franchises.

The Alphabet increase is particularly notable. The stock trades at roughly 19-20x forward earnings with double-digit revenue growth, AI monetization accelerating through search and cloud, and a balance sheet generating tens of billions in annual free cash flow. For a $397 billion cash pile looking for homes, it checks every Berkshire box: durable competitive advantage, pricing power, and the kind of compounding math that works over decades.

Long-term investors watching Berkshire as a bellwether should take note. Abel’s first quarter is a data point, not a verdict — but the direction is visible. Fewer, bigger, more deliberate bets. That is a playbook any patient investor can learn from.

In 2020, Warren Buffett stood before Berkshire Hathaway shareholders and declared airlines a mistake. The conglomerate sold every share it owned in Delta, American, United, and Southwest — collectively more than $6 billion worth of stock — absorbed the losses, and moved on. “The world has changed for the airlines,” Buffett said. End of story.

Or so everyone thought. Six years later, Berkshire is back — and the position it just disclosed may be one of the more interesting contrarian signals the company has sent in years.

Berkshire’s first 13F filing under new CEO Greg Abel, who officially took the helm from Buffett at the start of 2026, revealed a brand-new $2.65 billion stake in Delta Air Lines. That’s 39.8 million shares, making Delta Berkshire’s 14th-largest holding and giving the conglomerate a 6.1% ownership interest in the Atlanta-based carrier. For context, Berkshire last held Delta before dumping it at a loss during the pandemic panic.

But here’s what Abel appears to understand that the 2020 narrative missed: this is a materially different company than the one Buffett fled. Delta has spent the past several years quietly reengineering its revenue model away from low-margin seat sales and toward durable, high-margin businesses. In Q1 2026, premium products, loyalty programs, American Express remuneration, cargo revenue, and maintenance services for other airlines collectively represented 62% of Delta’s total revenue — and that bucket grew in the mid-teens year over year. In Q4 2025, premium cabin revenue exceeded main cabin revenue for the first time in the company’s history. The airline now looks less like a commodity transporter and more like a brand with a recurring loyalty engine attached to it.

The numbers are backing up the story. Adjusted operating revenue hit a record $14.2 billion in Q1 2026, up 9.4% year over year. Adjusted EPS of $0.64 climbed roughly 40% versus the prior year period. American Express remuneration — cash Delta receives from its co-branded credit card partnership — topped $2 billion for the quarter, up 10%. These are not the economics of a struggling airline.

The headwinds are real and worth acknowledging. Middle East tensions have sent jet fuel prices to roughly double their year-ago levels, and Delta expects more than $2 billion in additional fuel costs in Q2 alone. The company is trimming capacity and pushing through higher fares in response. But Delta has a structural hedge most carriers lack: its Pennsylvania-based Trainer refinery, which converts crude oil into jet fuel in-house and is expected to deliver roughly $300 million in cost relief this quarter alone. That asset becomes more valuable, not less, when oil is elevated.

And then there’s the valuation. With full-year 2026 adjusted EPS guidance of $6.50 to $7.50, and the stock trading around $70, Delta fetches roughly 10 times earnings — a steep discount to the broader market. For a business generating over $2 billion annually from a credit card partnership alone, that multiple invites a second look.

The more important signal here may not be Delta specifically, but what the Abel era portends for Berkshire more broadly. This is his first major portfolio overhaul, and the willingness to buy back into an industry his predecessor publicly abandoned — at a historically cheap valuation — suggests the new Berkshire will move differently than the old one. Patient investors who have tracked the conglomerate for decades now have a new set of signals to decode.

Oil prices have surged sharply, driven by escalating tensions in the Middle East. Market analysts highlight that this uptick reflects a growing concern over supply disruptions in the region, further intensifying the ongoing volatility in energy commodities. As uncertainties loom, investors are advised to reassess their strategies in light of potential price hikes and market shifts.

The S&P 500 has staged a remarkable comeback in recent weeks — recouping its losses and returning to record highs on hopes of an Iran resolution. But Federal Reserve Chair Jerome Powell just threw cold water on that rally with a blunt warning investors can’t afford to ignore.

Powell’s Final Warning: “Highly Uncertain”

At his final press conference as Fed Chairman, Powell delivered one of the starkest assessments of the year: “The economic outlook remains highly uncertain and the conflict in the Middle East has added to this uncertainty.”

Translation? The rate cuts investors have been banking on all year — at least two 25-basis-point cuts priced in by December — may not be coming. The FOMC has already held rates steady for three consecutive meetings. Now, with CPI inflation jumping to 3.3% in March (the worst reading since April 2024) and the Cleveland Fed forecasting 3.6% in April, the path to rate cuts is getting narrower by the month.

Oil Above $100 Is the Hidden Tax on Your Portfolio

Brent crude is trading above $100 per barrel. The IEA has called this the “largest supply disruption in the history of the global oil market.” Powell himself warned that higher energy prices will push up overall inflation — and that the duration of those effects remains unclear.

Here’s what that means in plain terms: every dollar gasoline stays elevated is a dollar not spent at retailers, restaurants, and everywhere else that drives consumer spending. Transportation and manufacturing costs will follow. The inflation ripple is just getting started.

The Valuation Problem Nobody Wants to Talk About

The S&P 500 currently trades at 20.9x forward earnings — above its five-year average of 19.9x. That premium was priced in under the assumption of rate cuts. If JPMorgan’s economists are right — that the Fed holds all year and potentially hikes in Q3 2027 — those valuations become very hard to justify.

Higher rates mean higher discount rates on future earnings. Higher discount rates compress P/E multiples. The math is simple and brutal.

Where Smart Money Is Looking

This isn’t a call to panic-sell everything. But the market narrative is shifting and the data is telling you where to pay attention:

• Energy stocks remain a natural hedge in an oil-shock environment
• Value and low-volatility names are outperforming growth and mid-caps
• Physical assets (gold, commodities) are seeing rotation from institutional money
• Big Tech still reported strong cloud/AI numbers — Alphabet, Microsoft, Amazon all beat — but the tailwind of cheap money may be fading

Berkshire Hathaway was a net seller in Q1 with a record $397 billion in cash on the sidelines. Greg Abel isn’t pushing the buy button. That’s worth noting.

The Bottom Line

The S&P 500’s recovery looks great on the surface. But with oil above $100, inflation reaccelerating, rate cuts disappearing from the calendar, and a geopolitical wildcard still in play, this is not a moment for complacency. Powell’s warning wasn’t subtle — and the investors who act on it before the crowd may be the ones who come out ahead.

Source: The Motley Fool, Federal Reserve, CME Group FedWatch, JPMorgan Chase, IEA

Donald Trump made a notable claim this week: he expects a deal with Iran to materialize before any formal ceasefire is on the table. If you think that sounds like a bold bet, you’re not wrong — but the market implications are very real.

Trump told reporters he was surprised by the stock market’s resilience amid rising Iran tensions, admitting he thought the Dow would be down 20% by now. Instead, markets have been grinding higher — a sign that investors may already be pricing in some form of diplomatic resolution, or simply betting that energy disruptions will stay contained. Either way, the market is sending a signal worth noting.

Here’s the trade angle: if a deal with Iran gets closer to reality, we could see crude oil prices ease, which would put pressure on energy stocks while giving airlines, shipping, and consumer discretionary a lift. Iran’s oil supply coming back online — even partially — would shift the supply-demand picture in ways that ripple through everything from gas prices to Fed policy expectations.

The flip side? This is Trump being Trump. If talks stall or escalate, energy stocks surge and defensive names outperform. The asymmetry here is worth watching. Traders who are positioned for continued volatility in crude may want to keep a finger near the exit, while those in risk-on names could get a pleasant surprise if diplomacy surprises to the upside.

The bottom line: Trump’s confidence may or may not be warranted, but the market seems less scared of this Iran story than the headlines suggest. Watch crude, watch the dollar, and watch whether any formal back-channel news breaks before this week is out. That’s when the real trade sets up.