Today we’re talking about chips—and no, not the kind that train large language models.

If your favorite snacks have felt expensive for a while, you’re not imagining it. PepsiCo, the parent of snack giant Frito-Lay—itself the parent of brands like Doritos, Tostitos, and Cheetos—has spent the past few years raising prices to offset higher pandemic-era costs. The result is that the chips you used to grab without thinking are now a small splurge: A single bag of Doritos costs $7 in some places, 50% higher than in 2021.

Consumers strained by higher inflation and lured by healthier options have revolted, while stores like Walmart have cut the shelf space dedicated to PepsiCo products. The result: PepsiCo’s revenue turned negative back in 2024 for the first time in over 13 years, and it has missed revenue targets by over $1 billion across the last two years.

A bite of good news

But there’s finally some good news for all the Lay’s and Ruffles loyalists out there: After activist investor Elliott Investment Management took a $4 billion stake in the company and applied pressure, PepsiCo agreed to cut some snack prices by about 15% in February. The results are already showing up in earnings.

Earlier today, the company announced that it beat both top and bottom line expectations in Q1, with net sales up 8.5%. North American food volumes grew for the first time in two years, signaling that consumers are coming back. At the same time, there was a boost from its acquisition of Poppi, a prebiotic soda company, whose organic revenue grew 2.6% this quarter.

Looking ahead, PepsiCo reiterated guidance for 2% to 4% organic revenue growth and 4% to 6% EPS growth, but flagged increased uncertainty as geopolitical tensions make the outlook harder to predict.

Shares of the snack food giant gained 2.28% today.

Cracks in the crunch

For now, the company seems unfazed by that volatility. In fact, CEO Ramon Laguarta said the Iran war is boosting sales in certain markets in the near term, as PepsiCo’s supply chain has held up better than competitors.

That said, challenges are piling up. Competition is intensifying from packaged food giants like Conagra Brands and General Mills, while consumers continue shifting toward healthier options—which cost more for PepsiCo to produce, while simultaneously pressuring demand for its traditional salty snacks.

Ultimately, just like how silicon chips quietly power the AI world, Frito-Lay is also the backbone of PepsiCo. While its beverage segment still trails Coca-Cola in global dominance, the snack unit commands nearly 60% of the US snack market. But if today’s results are any indication, pricing adjustments and steady demand could help anchor PepsiCo’s broader performance—even as pressures build elsewhere.—SY

🟢 What’s up

• Live Nation Entertainment rose 3% even though a federal jury found the company guilty of creating a monopoly over live entertainment events with its Ticketmaster unit.
• Oracle jumped 5.02% on an expanded multicloud networking deal with AWS.
• Hims & Hers Health gained 11.12% after HHS Secretary RFK Jr. moved to loosen restrictions on 12 peptides.
• Voyager Technologies climbed 8.79% after being selected by NASA for a private International Space Station mission.
• Advanced Micro Devices rose 7.8% to all-time highs, with Bernstein lifting its price target on strong server demand.
• Aehr Test Systems surged 10.43% after landing a $41 million AI-related production order from a hyperscaler customer.
• Myseum soared 129.17% as the social media company pivoted to AI, following a similar move from Allbirds yesterday.

What’s down

• Nvidia lost 0.26%, snapping an 11-day winning streak, its longest since 1999.
• Taiwan Semiconductor Manufacturing Company fell 3.13% despite a beat-and-raise earnings report, with results failing to clear elevated expectations.
• Allbirds dropped 35.79%, giving back part of its nearly-600% surge yesterday, amid skepticism around its AI pivot.
• Abbott Laboratories slipped 6% as a 7.7% decline in nutrition sales overshadowed an earnings beat.
• Luxury goods maker Kering fell 3.8% despite unveiling a plan to revive Gucci and double profitability.

It would be an understatement to say that it’s a strange time in markets. Despite the war in Iran, rising tensions between the White House and the Federal Reserve, and a labor market that’s cooling while inflation remains elevated, the S&P 500 just hit another all-time high today.

This all leaves investors in quite the pickle: Do you go defensive and lean into companies with strong balance sheets, or turn to classic value names, betting that the rally can elevate cheaper, underappreciated gems?

Of course, it’s not a simple either/or. We spoke with Nick Kalivas, Invesco’s Head of Factor and Equity ETF Strategies, to talk about how he sees the landscape, and where there are opportunities in the market.

Our conversation has been edited for length and clarity.

Looking at the market as a whole, where do you see the biggest disconnect today between price and fundamentals?

I’d say it’s still really in smaller stocks. If you think about smaller companies in the S&P 500, or look at the S&P 400 or 600, it really feels like investors have lost faith in smaller companies.

A lot of that is driven by recency bias. These large-cap names have been driving returns, and there’s a widespread belief that they’ll continue to do so. At the same time, there’s a lack of appreciation for where we are in the earnings cycle. Smaller companies are still in the trough or very early innings of an accelerating profit cycle.

So if earnings growth down the cap spectrum actually materializes the way people expect, that part of the market is under-owned and could attract a lot of renewed interest.

Click here to keep reading about balancing growth with quality, where the market cycle is going next, and more.

Forget SpaceX, Anthropic, OpenAI, and all those other upcoming tech IPOs that investors are salivating over—the hottest public debut of the year may very well be an air conditioning company.

Madison Air Solutions manufactures ventilation and air filtration systems, which isn’t exactly as exciting as AI or spaceships. But Madison is the largest industrial IPO to hit the market since UPS debuted in 1999, and investor hype was enough to sustain the $2.23 billion offering and propel shares 17.67% higher on their first day of trading today.

Picks and shovels

It’s easy to say you should forget about tech, but even Madison Air can’t escape the long reach of the AI trade. Investors are betting that the company is a smart play on AI infrastructure, with Madison providing an essential service to tech companies: cooling their servers straining under AI workloads in data centers.

Those data centers are springing up all over the country (well, except in Maine), which should provide Madison with plenty of lucrative contracts in the years ahead. When you combine its growing commercial business segment with its traditional housing business, Madison expects it can tap into a $40 billion addressable market in North America alone.

Ever-growing demand for data centers, coupled with the company’s 27.3% YoY revenue growth and the fact that it’s founder-led, may make Madison the next hot picks and shovels play in the AI trade.—MR

• European airlines are bracing themselves for a massive jet fuel shortage—but there’s one carrier that has hedged 80% of its fuel this year, positioning it to capitalize while its competition suffers.
• Even Trump appointee Stephen Miran warned that the Fed’s next move may not be so accommodating.
• The S&P 500 keeps hitting record highs, and it’s all thanks to the mega cap behemoths that don’t care about oil prices.
• A new “era” dropped, and it’s a doozy: The Wall Street Journal has declared it the era of the “mega-layoff.”
• The Pentagon is approaching carmakers like Ford and GM to play a larger role in producing weapons.
• CoreWeave just secured $1 billion in new funding from a big bond deal.

Economic reports: A week of real estate reports concludes tomorrow with March housing starts and building permits, and we’ve got one last bit of Fedspeak from Richmond Fed president Tom Barkin and Fed governor Christopher Waller.

Earnings announcements: We’ve got earnings from Ally Financial, Truist Financial, Regions Financial (noticing a pattern yet?), State Street, and Ericsson