Enjoying this content?
Get three under-the-radar investment themes delivered to your inbox every Monday.
Defense Laser Backlogs Hit Records, Storage Margins Surge, SiC Breakthroughs Expand
Theme 1: Defense Laser Manufacturing Surge on Record Contract Backlogs
The defense laser sector is experiencing unprecedented demand driven by geopolitical tensions and military modernization programs worldwide. Supply-side constraints from specialized manufacturing requirements and limited production capacity are creating pricing power for established players. Military budgets are increasingly allocating funds toward directed energy weapons and laser defense systems as traditional ammunition costs rise and supply chains face disruption.
The shift from development to deployment phase is particularly significant, as defense contractors move from R&D spending to production contracts with higher margins and more predictable revenue streams. nLIGHT's transition from operating losses to generating $21.33 million in annual operating cash flow demonstrates this sector's movement toward sustainable profitability.
Stocks that would benefit:
LASR: nLIGHT Inc - Leading the defense laser profitability transition with 71% year-over-year aerospace and defense segment growth in Q4 2025. The company's deliberate exit from commoditized industrial markets has enabled a 1,320 basis point gross margin expansion to 29.8% in 2025, while its $190 million equity raise and Longmont facility expansion (doubling high-energy laser capacity) position it at the forefront of sustained Pentagon demand for directed energy weapons. Read More →
ESLT: Elbit Systems - Positioned at the center of the defense laser boom with its record $28.1 billion order backlog providing unprecedented revenue visibility through 2028. Recent major contract wins totaling over $2.3 billion demonstrate how geopolitical tensions are translating directly into actionable defense spending, while 59% EPS growth in 2025 to $11.39 exemplifies the margin expansion as the company transitions from development to deployment phase. Read More →
LASE: Laser Photonics Corporation - Executing a strategic pivot to capture defense dollars by leveraging its TAA-compliant "Buy American" status to target 25% of revenue from U.S. government contracts. This shift has supported 179% revenue growth to $5.8 million through Q3 2025, and as a smaller player the company stands to benefit disproportionately from the sector's margin expansion as military laser platform adoption accelerates. Read More →
Theme 2: Storage Hardware Recovery on Price Cycle Turnaround
The storage industry is experiencing a fundamental shift from oversupply to balanced supply-demand dynamics. Manufacturers have rationalized production capacity over the past two years, while high-bandwidth memory and advanced storage products face genuine supply constraints due to manufacturing complexity. Cloud service providers are resuming capital expenditure programs and enterprise customers are upgrading storage infrastructure that was deferred during the downturn.
The price recovery is particularly significant because it marks the end of a prolonged period where storage companies operated with compressed margins. As pricing power returns, companies with strong market positions and advanced product portfolios are positioned to capture disproportionate margin expansion, led by high-end products where supply constraints are most acute.
Stocks that would benefit:
STX: Seagate Technology - Leading the storage recovery with proprietary HAMR technology delivering 30%+ capacity gains per drive and enabling premium pricing. Gross margins have expanded from 36% to a record 42.2% in just three quarters, with manufacturing capacity sold out through 2026 as cloud providers and enterprise customers compete for limited high-capacity supply. Read More →
PSTG: Pure Storage - Capitalizing on the storage recovery through enterprise all-flash solutions, having transitioned to a subscription model with its Evergreen//One offering delivering >90% gross margin royalties that lifted product margins to 72% in Q3 FY26. AI-optimized solutions address growing demand for storage systems that can efficiently handle machine learning workloads. Read More →
WDC: Western Digital - Transforming into a pure-play high-capacity drive company with 89% of revenue from cloud storage solutions for AI-driven hyperscale data centers. Gross margins are up 770 basis points year-over-year to 46.1% in Q2 FY26, with sold-out capacity through 2026 providing strong visibility into continued pricing power as AI data center demand outstrips supply. Read More →
Theme 3: Silicon Carbide Advancement on Next-Generation Power Platform Launches
The silicon carbide sector is experiencing a convergence of technological advancement and market demand expansion. Supply-side improvements include new manufacturing platforms that enable higher voltage capabilities and improved production yields, while companies are scaling from 150mm to 200mm wafer production for better economics. Demand drivers extend beyond electric vehicles to include industrial power conversion, renewable energy inverters, and power grid infrastructure modernization.
The sector's growth trajectory is supported by fundamental physics advantages of silicon carbide over traditional silicon in power applications, including higher efficiency, better thermal performance, and smaller form factors. As manufacturing costs decline through scale and yield improvements, SiC devices are becoming economically viable in broader applications, expanding the addressable market significantly.
Stocks that would benefit:
COHR: Coherent Corp - Leading silicon carbide advancement with breakthrough 150mm and 200mm epitaxy platforms supporting device architectures up to 10 kilovolts, directly addressing growing demand for high-voltage power electronics in industrial applications and AI data centers. The expansion of its 300mm SiC platform further strengthens its position through vertically integrated manufacturing capabilities. Read More →
ON: ON Semiconductor - Actively reshaping its portfolio toward higher-margin silicon carbide products through deliberate capital reallocation, addressing the expanding market for high-efficiency power electronics across automotive, industrial, and renewable energy applications. Its manufacturing expertise and established customer relationships in power management provide a strong foundation for SiC expansion. Read More →
WOLF: Wolfspeed - Pure-play silicon carbide manufacturer with vertically integrated production from substrates to devices. The company produced the first 300mm SiC wafer and launched the first commercial 10kV SiC power MOSFET, expanding the addressable market into grid infrastructure, industrial power conversion, and renewable energy systems. Read More →
Join our Discord community to give feedback, request features, or ask questions about the newsletter or website.
https://discord.gg/yePwyWrwJBThe content is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk. Past performance is not indicative of future results. Investments may lose value and are not guaranteed.
Loading more newsletters...
