Cisco, Lumentum eyed as AI capex trade tests earnings

The Dow futures contract was last around 54,152, up modestly on the day and sitting well above its 50-day moving average of 52,256.7 and 200-day average of 49,390.48. The Nasdaq 100 futures were at 29,834.75, also above both its 50-day average of 29,514.94 and 200-day average of 26,744.03. The S&P 500 ETF SPY finished at 773.26, with its relative strength index at 69.6 — a reading that points to strong momentum but also a market that is no longer cheap or sleepy. Adalytica’s S&P 500 trade signals show extreme greed, underscoring just how crowded the bullish trade has become.

That is why earnings matter more than usual here. In a market already priced for perfection, the next leg higher depends on whether companies keep proving that AI infrastructure spending is not just a story, but a cash-flow cycle. Cisco sits squarely in that lane as networking demand follows cloud and data-center buildouts. Lumentum is even more directly tied to the optical and photonics layer that has become essential as hyperscalers push more data through more expensive pipes. If those names guide higher, it would strengthen the whole capex complex — from semis to networking gear to the suppliers that move light across data centers.

Berkshire’s results help frame the tape because they remind investors that the market is still willing to pay up for companies with scale, cash generation and exposure to broad industrial and financial demand. That does not mean the rally is broad-based. It means leadership is narrowing toward quality, and earnings are the only thing that can justify it. The recent push in SPY to fresh highs, alongside a rebound in Dow futures, suggests investors are not yet running for the exits. But the setup is fragile: when the market is this extended, any disappointment from Cisco or Lumentum can quickly hit sentiment across the AI supply chain.

There is also a macro overlay. Treasury bond sentiment has turned constructive even as equities push higher, a reminder that investors are still balancing growth enthusiasm against eventual rate and valuation risk. For now, that tension is working in favor of large-cap winners with real earnings power. It is not as forgiving for unprofitable AI names or companies that rely on multiple expansion alone.

Our thesis is simple: the best way to stay positioned for the next upside phase is not to chase the index, but to own the picks-and-shovels beneficiaries of enterprise and cloud capex before the next earnings wave confirms the cycle. Cisco and Lumentum are the near-term catalysts, but the bigger opportunity remains the infrastructure stack beneath AI — networking, opticals, power, and the industrial names that keep the buildout moving. If the reports land well, the market’s appetite for the compute trade could expand again. If they miss, the rotation will be fast.