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Sunday, October 11, 2026

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@StableBread

Fajasy on X

Excluding medical isotopes, commercial power revenue at BWX Technologies $BWXT nearly tripled, from ~$400M in 2023 to ~$1.1B expected in 2026. $BWXT’s commercial segment is growing much faster than its government segment, driven by (1) Ontario rebuilding its reactors, (2) Canada’s plan for new ones, and (3) the U.S. push for new AP1000 reactors. Its commercial backlog more than doubled to $1.6B. Kinectrics, a Toronto-based nuclear engineering and testing firm acquired in May 2025, explains part of the jump. Commercial revenue grew 72% in Q2 2026, or 33% excluding the acquisition. In Ontario, utilities are rebuilding reactors to run for decades longer. $BWXT is building 48 steam generators for Ontario Power Generation’s (OPG) Pickering refurbishment, part of more than CAD$1B (~$700M) of contracts. The same contracts cover the reactor pressure vessel for the first BWRX-300 at OPG’s Darlington station, a 300 MWe small modular reactor (SMR) designed by GE Vernova Hitachi. The 10-K calls $BWXT “the only commercial heavy nuclear component manufacturer in North America.” Notably, its Cambridge, Ontario plant is turning out more than 1.5 steam generators/month vs. the 1/month its schedule requires, per $BWXT’s Investor Day on September 29, 2026. Beyond refurbishments, Canada’s June 2026 nuclear strategy calls for “up to ten new large-scale reactors,” with two under construction by 2035 and five more planned or under development by 2040. $BWXT already has licensing and early engineering contracts for the large reactors planned by OPG and Bruce Power, the private operator of Ontario’s Bruce nuclear station. John MacQuarrie, president of Commercial Operations, estimated Canada’s new-build market at CAD$120-150B (~$84-105B) at Investor Day. Slide 31 shows $BWXT’s potential revenue per new reactor: → CANDU (Canada’s heavy-water reactor design): $350-700M per reactor. → AP1000 (Westinghouse’s large U.S. design): Low hundreds of millions of dollars. → SMRs: $50-100M.
@convequity 4 clicks

Convequity on X

OpenAI and Anthropic will rent most of the AI capacity they plan, but mainly from the big clouds rather than the listed neoclouds Convequity's AI Bubble Barometer (ABBX) tracks the data-centre capacity each company plans and how much of it it expects to rent from partners rather than own. 1. OpenAI plans 21.2 GW, of which 18.0 GW is to be supplied by partners. Anthropic plans 13.8 GW, all of it from partners. Together the two labs plan to rent 31.8 GW. 2. That is 2.8 times the 11.2 GW that the five hyperscalers, $MSFT, $AMZN, $GOOGL, $META and $ORCL, plan to rent from others. 3. The labs' named suppliers are mostly AWS, Oracle, Google, Azure and SB Energy. CoreWeave, a listed neocloud, and Nscale, a private one, appear on the lists, but the bulk of the 31.8 GW is not with listed neoclouds. 4. The seven listed neoclouds, $CRWV, $NBIS, $IREN, $APLD, $CORZ, $CIFR and $BTDR, plan to build 33.62 GW of their own. Much of that is gross site power rather than contracted IT capacity. 5. The labs are also behind most of the recent growth in AI capacity plans. Since 14 Jul, the total capacity that the 15 ABBX companies say they plan to have has risen by 22.19 GW, from 131.23 GW to 153.42 GW on 7 Oct. OpenAI and Anthropic raising their own plans accounts for 13.7 GW of that rise (62%). We think the labs' rental demand mainly supports $AMZN, $ORCL, $GOOGL and $MSFT. The neoclouds will need to fill their pipelines largely with other customers, including the hyperscalers' own 11.2 GW of planned rentals, so we would not read the labs' plans as demand for the neoclouds.
@StableBread

Fajasy on X

The Department of Energy conditionally committed $17.5B in loans in June 2026 for long-lead equipment for up to 10 AP1000 reactors (Westinghouse’s large U.S. design), and only “a limited number of heavy engineering plants” can make the components, per World Nuclear News. BWX Technologies $BWXT bought Precision Components Group (PCG) in July 2026 to get a U.S. foothold. PCG makes heat exchangers and other heavy components at plants in York, Pennsylvania, and Florence, New Jersey, but it can’t make the largest parts, like an AP1000 reactor pressure vessel, CEO Rex Geveden said on the Q2 call. So $BWXT is weighing New Jersey, Indiana, and one other location for a new U.S. large-component plant, and Geveden expects “a final investment decision in the coming months.” He also expected at least one new-build equipment order by the end of 2026, from the three additional small modular reactors (SMRs) planned at Darlington in Ontario, the AP1000 projects, or BWRX-300 SMR projects in the U.S. John MacQuarrie, president of Commercial Operations, widened that window at $BWXT’s Investor Day on September 29, 2026, saying awards should start “either later this year or early in 2027.” $BWXT’s Investor Day targets call for high-teens annual revenue growth in the commercial segment through 2030, with adjusted EBITDA margins rising to the high teens from 13% in 2026. Reading “high teens” as 16-19%, commercial revenue would grow from ~$1.1B in 2026 to ~$2.0-2.2B by 2030, and adjusted EBITDA from ~$140M to ~$320-420M. That would make commercial about a third of $BWXT’s adjusted EBITDA, up from about a fifth.
@convequity 4 clicks

Convequity on X

Neoclouds trade at 2.6x invested capital, less than half the hyperscalers' 6.1x The seven neoclouds in Convequity's AI Bubble Barometer (ABBX), $CRWV, $NBIS, $IREN, $APLD, $CORZ, $CIFR and $BTDR, lost 7.2% of their combined enterprise value this week, from $190.2B at the 2 Oct close to $176.5B at the 9 Oct close. Over the same week the five hyperscalers, $MSFT, $AMZN, $GOOGL, $META and $ORCL, gained 2.4%, from $13,316B to $13,637B. 1. Enterprise value divided by invested capital (EV/IC) at the 9 Oct close was 2.6x for the neoclouds and 6.1x for the hyperscalers. At the 2 Oct close it was 2.8x and 6.0x. 2. ABBX estimates the weighted average cost of capital (WACC) at 14.6% for the neoclouds and 9.7% for the hyperscalers. 3. At the 9 Oct close, neocloud share prices were 20% to 45% below each stock's best Friday close since 17 Jul: CIFR −44.5%, CORZ −33.3%, BTDR −25.8%, IREN −24.6%, APLD −24.1%, CRWV −22.0% and NBIS −20.4%. Among the hyperscalers, ORCL was 10.9% below its best, AMZN and META 4.4% and GOOGL 1.3%, while MSFT closed above its best. We think most of the discount reflects the neoclouds' higher cost of capital rather than a mispricing. We would not call 2.6x cheap until they report their July to September backlog and customer prepayment figures.
@convequity 2 clicks

Convequity on X

A laser that only one company can supply will not scale to the volumes AI needs. That is the main reason $LITE is a less attractive investment to us than it was a few quarters ago. Our post on Lumentum got more attention than we expected, so we want to set out the argument in plain terms, including what we think about microLED. We did not say microLED will certainly happen. 1. The part in question is Lumentum's ultra-high-power external laser source. In co-packaged optics, the optical parts sit inside the chip package. The laser sits outside, in its own module, and its light is carried into the package by fibre. That outside module is the external laser source. Ultra-high-power means one laser produces enough light to feed many optical channels at once. 2. If only one vendor can make that laser, it has little chance of reaching meaningful volume. One supplier cannot carry a part the whole industry needs. So the industry has to find other paths around that bottleneck. 3. The first likely path is micro-VCSELs. A VCSEL is a vertical-cavity surface-emitting laser: a tiny laser that sends light out of the top of the chip rather than out of its edge. They are made many at a time on a wafer, and each one is low power. A micro-VCSEL is a very small version. Many small lasers do the job of one very powerful one. 4. The second path is a less powerful laser packed inside the NPO package. CW stands for continuous wave: the laser emits a steady beam, and a separate part, the modulator, switches that light on and off to carry data. NPO is near-packaged optics: the optical engine sits on the board right next to the chip, rather than inside the chip package or in a pluggable module at the front of the switch. In this path the CW laser is still fairly high power, but not ultra-high power, and it sits inside the optics package instead of in a separate external module. 5. The third path is microLED. A microLED is a very small light-emitting diode, the same kind of device as in a display, not a laser. Each one is switched directly to carry data, and many of them run in parallel over short distances. 6. On microLED, the consensus on X is that it will not work for AI interconnects. We are not saying it will certainly happen. It is one of several alternatives. But there is good research work on it, and it has a chance. Most of the criticism we see is aimed at one architecture. The research we rate uses microLEDs in a different architecture, and the criticism does not address it. 7. Lumentum will still grow. But compared with the previous few quarters it is a less attractive investment, because its ultra-high-power laser is the part the industry has to find a way around. We trimmed most of our Lumentum position earlier this year, around when the share price began to flatten.

Investor Letters

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