Welcome back to the Weekly Compounder Update. Each week we track the headlines that matter for long-term investors who care about moats, margins, and durability. Not just price action.
This week’s news pulled in two directions. We finally received a delayed jobs report that showed an economy that is still growing but increasingly strained. At the same time, market volatility remains despite strong earnings from Nvidia, giving some weight to the more pessimistic voices, including Ray Dalio. His message that we are “definitely in a bubble”, but that it is not a reason to sell, was one of the more useful messages in a noisy week.
Underneath all of this, quality companies continue to execute, and that remains what matters most. The real work is staying focused on fundamentals and risk management rather than trying to time every macro or sentiment shift. Let’s jump in.
General News
- Delayed jobs report shows 119,000 new jobs in September, but gains are narrow (AP News) → After a long delay caused by the federal shutdown, the Labor Department reported that employers added 119,000 jobs in September, more than double expectations. The report showed that almost 90% of those gains came from healthcare, social assistance, and leisure. The unemployment rate rose to 4.4% as manufacturing lost jobs again.
- Ray Dalio says AI trade is “definitely in a bubble,” but not a reason to sell everything (CNBC) → On CNBC, Ray Dalio argued that AI spending and the associated stock moves now fit his definition of a bubble. While he noted that these conditions often lead to lower long-term returns, he also cautioned against selling simply because of the label. His point was that no one can time when a bubble will burst, and that investors should focus on diversification and risk controls rather than trying to time the market.
My take: Being aware of the risks in front of us is an important exercise. The economy is not falling apart, but it does look fragile underneath the surface. That is precarious when parts of the market are reflecting elevated expectations, particularly around AI. I normally would not give much credence to Dalio’s interviews, but his message this week is the right one. Do not try to time the market.
For long-term, thesis-driven investors, this is when focus and discipline matter. There is no reliable way to predict when a bubble will peak or when the next drawdown will arrive. The better path is to own quality businesses, respect valuation, diversify, and build in risk controls so you can stay invested when volatility hits. I walked through how I think about that in more detail in 5 Ways I Protect My Stock Portfolio from Risk.
Company Spotlights
Domino’s Pizza (DPZ)
What happened: Domino’s introduced its first major brand refresh in more than a decade. The company rolled out updated packaging, a new jingle, and black-and-gold boxes for premium items. This comes alongside strong momentum in the business. U.S. same-store sales rose 5.2% in the most recent quarter and total sales grew 6.2%. Strength was attributed to the $9.99 value offer, stuffed-crust demand, and broader delivery reach through DoorDash and Uber. 📖 WSJ: Domino’s Puts Hopes on Rebranding
What it means for investors: Domino’s is an outlier in a weak restaurant environment. The company’s scale and franchise model allow it to run national value offers that CFO Sandeep Reddy said competitors simply cannot match. This explains why traffic is holding up while other restaurants slow. Domino’s is resilient at a time when consumers are looking for lower-cost options.
This has led to the brand taking market share, as the growth in carryout suggests. The rebrand also helps keep Domino’s relevant as new menu offerings like stuffed crust drive interest. Well off its highs, the stock is trading around 22x forward earnings. Given the strength of its competitive positioning, Domino’s tends to earn its multiple when it is gaining share in a pressured environment, making the stock interesting here.
Microsoft (MSFT)
What happened: Microsoft and Nvidia announced new strategic investments in Anthropic. Microsoft will invest up to $5 billion and Nvidia up to $10 billion which pushes Anthropic’s valuation toward $350 billion. Anthropic committed to roughly $30 billion of Azure compute and up to 1 gigawatt of capacity from both companies. 📖 CNBC: Anthropic valued in range of $350B following investment deal with Microsoft, Nvidia
What it means for investors: Microsoft’s justification for this partnership is that it gives enterprise customers more flexibility and reinforces Azure as the default home for advanced AI workloads. But reading between the lines, this is about reducing its dependence on OpenAI. That is a smart move. Diversifying its model partners lowers platform risk and gives Microsoft more control over the direction of its AI ecosystem.
Now, the stock is well off its highs. The pullback reflects a view that Alphabet is taking the lead in AI after its Gemini 3 release, and Microsoft’s connection to OpenAI is being viewed as a liability at the moment. It is important to remember, however, that this is not a one-company-takes-all race. Microsoft is making the right strategic moves to strengthen its position, and likely remains a long-term winner in cloud and enterprise AI. This is one to buy on weakness.
MSCI Inc. (MSCI)
What happened: MSCI’s Head of Analytics, Jorge Mina, spoke at RBC’s Global Technology, Internet, Media and Telecommunications Conference about how the firm is using generative AI. He framed GenAI as both a productivity tool and a growth driver. Mina highlighted efforts to both automate data processing and model-building internally while layering AI on top of MSCI’s datasets across business segments. 📖 RBC Global Technology, Internet, Media & Telecommunications Conference transcript
What it means for investors: This fits with the way I think about MSCI. As I wrote after Q2,Index is the cash machine that powers the model, but the real question is whether Analytics, ESG, and Private Assets can evolve into a true second engine of growth. Mina’s comments suggest that this is exactly what MSCI is working toward.
AI helps on both sides of the P&L. Internally, it automates labor-intensive work in data sourcing, cleaning, classification, and model updates. Externally, it gives MSCI new ways to package its datasets and models into higher value models and tools for clients.
One point made during the conversation is that generic models are only as good as the data fed to them. MSCI’s edge is the proprietary index, risk, ESG and private assets data that institutions already rely on.
The takeaway is this: Management sees AI as a tool to deepen the moat around MSCI’s data franchise while improving efficiency across the business. The confidence is there, but it still needs to show up in results. The Index segment will remain the core, but if MSCI can turn Analytics, ESG, and Private Assets into a second engine of growth, the long-term story becomes even more compelling.
Medtronic (MDT), Intuitive Surgical (ISRG)
What happened: Medtronic reported a strong Q2 FY26 with $9.0B in revenue (+6.6% reported, +5.5% organic) and raised full-year revenue and EPS guidance as procedure volumes and growth programs outperformed.
My interest here, however, is not Medtronic’s results, but what they tell us about the competitive landscape in robotic surgery, particularly for Intuitive Surgical. Medtronic used the call to highlight ongoing progress with Hugo, its soft-tissue robotics platform. 📖 Medtronic Q2 FY26 Earnings Call
- Hugo continues to move through clinical milestones. The Enable Hernia Repair study met safety and effectiveness endpoints, and the Embrace Gynecology U.S. pivotal trial is now underway. These are required steps before Medtronic can broaden indications in the U.S.
- A U.S. launch is approaching for Hugo. Management expects FDA approval for Hugo’s urology indication in the back half of FY26. This would represent the system’s first meaningful foothold in the U.S. market.
- There is a growing emphasis on AI. Medtronic highlighted the expansion of its Touch Surgery digital ecosystem. It is already active in more than 30 countries. The platform uses computer vision and AI for training, case guidance, and workflow insights. Management is positioning this technology as a core differentiator for Hugo.
What it means for investors: For Intuitive Surgical, real competition is coming. Hugo is progressing through the right milestones and targeting procedure areas where da Vinci is already well entrenched. But ISRG still holds a very large lead. The installed base, surgical data advantages, indication breadth, and surgeon loyalty create a moat that is not easily replicated.
The broader takeaway is that a scaled player like Medtronic continuing to invest in soft-tissue robotics and AI will slowly raise the competitive bar. That may introduce some pricing pressure at the margin, but it also reinforces the opportunity in robotic, data-driven surgery.
For now, we continue to watch developments in the space. The question is whether Medtronic, J&J, or anyone else can secure a foothold in this category where ISRG already dominates. That remains uncertain, but the effort is clearly there.
Earnings Spotlights
The Home Depot (HD)
What happened: Home Depot reported Q3 sales of $41.4 billion, up 2.8% year over year, including $900 million from the newly acquired GMS. Comparable sales were essentially flat (+0.2%), with U.S. comps up +0.1%. Adjusted EPS came in at $3.74, down 1% from last year and slightly below expectations. Management lowered full-year guidance due to softer demand, the lack of storm activity, and continued pressure in housing. 📖 Home Depot Q3 2025 Earnings Release
Key Takeaways
- Pro ecosystem strengthening. Engagement continues to build as new tools like project planning and AI-driven blueprint takeoffs simplify complex jobs. Early cross-selling between Home Depot’s sales force, SRS, and GMS shows the combined platform gaining traction with larger contractors.
- Demand remains soft. Larger renovation projects are still under pressure as financing remains expensive and housing turnover remains low.
- Digital and delivery are still a bright spot. Online comp sales rose 11% and faster fulfillment continues to drive satisfaction and engagement.
- Guidance revised down: HD now expects 3% sales growth, slightly positive comps, 33.2% gross margin, 12.6% operating margin, and 5–6% EPS decline for FY25.
My take: Home Depot remains in a difficult spot. Near-term trends in housing and consumer sentiment are not working in its favor, and the company is managing through a low-turnover environment that will take time to normalize. Even so, the core business remains solid. ROIC is still strong, the balance sheet is healthy, and the investments in the Pro ecosystem, digital fulfillment, and store growth are paying off.
The stock looks fairly valued for a business navigating cyclical headwinds. The question looking forward is not whether demand recovers, but how long this period of weak turnover lasts. Investors should expect uneven results for a while, but the long-term competitive position appears sound. When demand turns, Home Depot is positioned to benefit.
NVIDIA (NVDA)
What happened: Nvidia posted another extraordinary quarter. Revenue reached a record $57.0 billion, up 62% year over year. Data Center revenue rose to $51.2 billion, up 66% year over year, supported by record demand for Blackwell systems and continued strength across hyperscalers, foundation model builders, and enterprise AI workloads. GAAP EPS was $1.30, up 67% year over year. The stock traded up more than 5% after the report but gave back those gains and finished the day lower. 📖 Nvidia Q3 FY26 Earnings Release
Key Takeaways
- Blackwell demand is impressive. Management said cloud GPUs are sold out and reaffirmed visibility to roughly half a trillion dollars of Blackwell and Rubin revenue through the end of 2026.
- Hyperscaler spending remains healthy. Nvidia highlighted that top cloud and hyperscaler CapEx expectations for 2026 have risen to about $600 billion. Much of the spend is tied to generative AI.
- Inference is now emerging as another growth driver. Management emphasized that inference workloads are growing exponentially due to longer context windows and chain-of-thought reasoning. These areas are driving the demand for Blackwell chips.
- AI adoption is broadening. Perhaps the most important takeaway is that demand for Nvidia’s products are expanding beyond the hyperscalers. Management pointed to rising enterprise usage across platforms like ServiceNow, CrowdStrike, SAP, Palantir and Salesforce, along with growing deployments in health care, robotics and industrial digital twins.
- Guidance supports the growth trajectory. Q4 revenue is expected to reach $65 billion, up 14% sequentially, with gross margins around 75%. Management aims to hold margins in the mid-70s next year despite higher input costs.
My take: This was unquestionably a strong quarter and it reinforced the AI narrative, at least for now. The near-term outlook is as strong as anything we have seen this earnings season. Growth is extraordinary and the guidance points to another step higher. The challenge is that the market already understands how good the next few quarters look. Even with the broader adoption story taking shape, Nvidia still depends heavily on hyperscaler spending, and that dependence introduces real cyclicality.
This is why the multiple appears reasonable against today’s growth but remains sensitive to any shift in demand. Nvidia continues to execute at an elite level and its technological lead looks intact, yet the long-term case sits on top of a spending cycle that will eventually normalize. For now, demand is overwhelming and the product cycle is early, but investors should stay mindful of where the curve could flatten and how concentrated the customer base remains.
Watchlist Movers (±5%)
It was a tough week for many companies, especially those tied to the AI narrative, as volatility picked up again. Several high-quality names lagged on sentiment rather than fundamentals, while a handful of defensive compounders managed to hold their ground.
Closing Thoughts
This was another week where headlines pulled markets around, but the underlying theme stayed the same. Expectations remain elevated in parts of the market, which means reactions can be sharp as sentiment shifts. That is not a signal to panic. It is a reminder that valuation and discipline deserve attention.
For investors focused on long-term compounding, these stretches should be welcomed. Pullbacks reset prices and test conviction. They give you a chance to revisit each holding with a clear view. If the thesis holds and the long-term story remains durable, weakness should be perceived as opportunity. Staying patient, knowing what you own, and using volatility to your advantage is what keeps compounding on track.
Back next week with more.
P.S.
🗞️ Missed last week’s update? Catch up on prior spotlights and my newly updated Investing Philosophy anytime.
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