History Is Being Made. You Only Get One Chance!

BWB - Business With Brian•Jun 5, 2026

Summary

Brian begins by drawing a parallel between the current global supply chain risks, particularly those related to the Strait of Hormuz, and the 2011 Thailand floods that significantly impacted the hard drive industry. He emphasizes that the Hormuz situation is more extensive, affecting not just oil but also a quarter of global liquefied natural gas (LNG), helium, and sulfur, which are critical inputs for the technology sector. This widespread disruption poses severe risks to producers without pricing power but creates significant opportunities for companies structured to capitalize on such constraints.

Brian has identified ten technology companies that pass a strict filter: they have demonstrated two-quarter margin expansion, secured signed contracts with named hyperscaler customers, and have production already booked through 2027. He categorizes the first six as storage, optical, and semiconductor names, and the latter four as AI-powered companies. While acknowledging that many of these stocks are trading near all-time highs and advising caution with chasing them, Brian also stresses that the underlying supply constraints are very real and could easily push these stocks to new record highs. He underscores the importance of high conviction in the business coupled with disciplined entry points.

The identified companies are:

**Lumentum:** This company is crucial for AI data centers, manufacturing lasers and optical components like externally modulated lasers (EMLs) and ultra-high power pump lasers that facilitate data movement between GPUs. Lumentum benefits structurally from Hormuz-style supply tightness as it is the dominant volume supplier of 200-gigabit per lane EMLs, a critical component for next-generation 1.6 terabit optics. Industry analysts project a 36% EML supply shortfall by 2026, leading customers to secure capacity at premium prices, exemplified by NVIDIA's $2 billion equity investment and multi-year purchase commitment. Their GAAP gross margin has tripled from 16.6% in mid-2024 to 44.2% in the most recent quarter, with AI optics now comprising 86% of their revenue.

**Ciena:** Ciena sells optical transport boxes, particularly their WaveLogic 6 Extreme platform, which allows hyperscalers to extend GPU fabrics across multiple physical campuses. They benefit from the Western optical market structure, where, after Nokia's acquisition of Infinera, it became a two-vendor market. This allows Ciena to pass on rising supplier costs. Over 90 global customers have committed to their platform, and the four largest hyperscalers have budgeted over $600 billion in 2026 CapEx for their products. Ciena raised prices, guided to additional increases, and reported a 40% year-over-year revenue growth and nearly quadrupled adjusted EPS in Q2, raising full-year guidance to $6.3 billion (32% growth). Brian notes that a recent pullback in the stock dropped it into his buy zone.

**Seagate Technology:** Seagate makes high-capacity hard drives for nearline storage used by hyperscalers. The company is directly affected by the Hormuz situation because every hard drive above 10 terabytes is helium-sealed, and Qatar, a major helium supplier, declared force majeure on its facility, cascading from a natural gas halt. This resulted in Seagate raising production allocation pricing by 20-30% and finalizing build-to-order contracts with hyperscalers through fiscal 2027. Their GAAP gross margin expanded from 41% in December 2025 to 46.5% in March 2026, with future guidance projecting above 50% gross margin for the very first time, mirroring the profit surge observed during the 2011 Thailand floods.

**Western Digital:** As a pure-play hard drive maker after spinning off its SanDisk business, Western Digital generates 89% of its revenue from cloud and hyperscaler customers. Similar to Seagate, it is exposed to the helium constraint for its high-capacity drives, particularly its ultra SMR 40-terabyte volume drives. Western Digital has secured longer-term agreements with five of its top seven hyperscale customers through 2026, with some extending to 2028 and 2029. They raised average selling prices by approximately 9% year-over-year and achieved a gross margin above 50% for the first time in Q3, primarily driven by its cloud segment, which grew 48% year-over-year. Brian highlights its cleaner balance sheet as an advantage.

**Credo Technology Group:** This company specializes in high-speed copper cables (active electrical cables) for short-distance connections within data center racks, holding about 73% of this market. Credo benefits when the helium and laser supply chain experiences further breakdowns due to Hormuz constraints. Hyperscalers are compelled to redesign their builds around Credo's copper solutions for links where copper is viable, as fiber transceivers become scarce and expensive. This represents a structural shift, not a temporary substitution. In the most recent fiscal quarter, Credo tripled its revenue year-over-year, expanded gross margin to over 68%, and became profitable, earning almost 39 cents of net profit on every revenue dollar.

**Astera Labs:** Astera Labs designs connectivity chips—re-timers, smart cable products, and fabric switches—that link AI processors. Their silicon is used by major hyperscalers like Nvidia, AMD, Microsoft, Google, and Meta. When fiber optic connectivity becomes constrained and costly, hyperscalers redesign their racks to accommodate more processors and connect them with copper and short-reach links, which are unaffected by Hormuz. This rack redesign increases the chip content per rack, where Astera provides all three relevant chip types, including its new 320-lane fabric switch. Astera grew revenue 93% year-over-year and expanded gross margin to an impressive 76%.

**Constellation Energy:** Operating the largest nuclear fleet in the US and, after acquiring Calpine, becoming the country's largest private sector power producer, Constellation Energy serves hyperscalers building AI data centers. Its connection to Hormuz lies in natural gas; as global LNG tightens, US natural gas prices rise, increasing grid electricity prices. Constellation's nuclear plants, with fixed marginal costs of around $32 to $35 per megawatt-hour, capture the entire spread when electricity prices increase. Microsoft and Meta have signed 20-year contracts for Constellation's carbon-free power at premium pricing. Management guides for nearly 20% year-over-year earnings growth for 2026 due to strong Calpine integration and rising power prices.

**Talen Energy:** Talon Energy is a concentrated version of the Constellation trade, operating the Susquehanna nuclear plant and recently acquiring natural gas plants. It benefits from gas price spillover. A 17-year, $18 billion agreement with Amazon Web Services covers 76% of Susquehanna's output, with a fixed price for the first 10 years and then a fixed margin above market prices. This automatic reset ensures Talon captures upside if natural gas prices remain elevated due to Hormuz pressures. The company reported 79% year-over-year revenue growth and quadrupled adjusted free cash flow, with the Amazon contract economics still ramping up through 2032.

**Bloom Energy:** Bloom Energy bypasses the grid entirely by manufacturing solid oxide fuel cells that convert natural gas or hydrogen into electricity on-site, serving as primary power sources for data centers. Bloom is the only fuel cell maker shipping at gigawatt scale. Hormuz volatility, coupled with the 5-7 year wait times for new AI data center grid connections, drives hyperscalers to seek on-site power solutions. Bloom can deliver a working power plant within months. Oracle, AEP (for Amazon), and Brookfield have signed transformative contracts totaling billions of dollars for Bloom deployments. After a decade of losses, Bloom turned profitable in 2024, with revenue growing 130% year-over-year (product line up 208%) and a strong product gross margin of 35% (compared to 18% for services).

**Powell Industries:** This small-cap pick designs custom-engineered electrical equipment like switchgear and bus ducts for connecting power sources to circuits in AI campuses. Powell secured a $400 million "mega order" for AI data center switchgear, its largest project ever. On the oil and gas side, the strengthening case for US-based LNG exporters due to Hormuz-induced international supply constraints drives demand for Powell's switchgear. Electric utility revenue (including data center work) grew 49% year-over-year, and their backlog increased from $1.8 billion to $2.2 billion, indicating AI grid work is taking over their business.

In summary, Brian concludes that these companies are uniquely positioned to convert supply chain constraints into expanded margins, rather than merely absorbing them, by leveraging their critical roles in technology and energy infrastructure amidst global disruptions.