Tuesday, September 1, 2026

Do you have dry powder for the "Great Ai rotation"? 10 Stocks we like for the next 3 to 12 months!

Despite reports to the contrary, the Ai buildout continues to grow!

The Great AI Rotation Fall 2026

10 Stocks Positioned for the Next Phase of AI Infrastructure

September 1, 2026 — A RetireFund Working Investment Report

The next leg of AI spending is increasingly moving beyond GPUs and into the bottlenecks surrounding them—memory, optical connectivity, Ethernet/copper networking, custom silicon, power delivery, cooling and physical data-center systems.

That thesis remains intact despite today's weak tape. On September 1, the S&P 500 fell 0.71% and the Nasdaq 1.03% as long-term yields rose and oil prices jumped. That macro backdrop argues for staged entries rather than chasing rebounds, particularly because several of the best AI-infrastructure names have already undergone significant corrections.

My conclusion after updating the numbers is that COHR, CLS and MU remain the three stocks I would begin with, but the full 10-stock ranking contains several opportunities that may be almost as attractive—particularly MRVL and QCOM.

Executive ranking

Rank	Company	Sept. 1 price	AI role	Current stance	Alpha score
1	Coherent (COHR)	$272.03	Optical interconnect / photonics	BUY	9.6/10
2	Celestica (CLS)	$296.24 US	AI servers / switches / hardware platforms	BUY	9.5/10
3	Micron (MU)	$933.44	HBM / DRAM / NAND	BUY, staged	9.3/10
4	Marvell (MRVL)	$210.40	Custom silicon / networking	BUY	9.1/10
5	Qualcomm (QCOM)	$166.61	Edge AI + emerging data-center compute	BUY	8.9/10
6	Vertiv (VRT)	$255.97	Power / cooling	BUY on weakness	8.6/10
7	Broadcom (AVGO)	$368.55	Custom AI ASICs / networking	BUY after earnings clarity	8.5/10
8	Credo (CRDO)	$206.63	High-speed copper/optical connectivity	Starter only	8.2/10
9	Applied Optoelectronics (AAOI)	$103.39	Optical transceivers	Speculative BUY	7.8/10
10	Bloom Energy (BE)	$213.63	Behind-the-meter data-center power	WAIT / starter only	7.5/10

Prices are September 1 U.S. closes where available. COHR closed at $272.03, MU at $933.44, MRVL at $210.40, QCOM at $166.61, VRT at $255.97, CRDO at $206.63, AAOI at $103.39 and BE at $213.63. CLS closed around $296.

1. Coherent — COHR

My #1 near-term AI-rotation idea

At $272.03, COHR is roughly 38% below its $440 52-week high. That alone doesn't make something inexpensive, but the underlying business has continued moving in the opposite direction.

Fiscal Q4 revenue reached $2.05 billion, while non-GAAP EPS was $1.74. More importantly, management guided fiscal Q1 2027 revenue to $2.2–$2.4 billion and non-GAAP EPS to $1.85–$2.05.

That means the stock has experienced a major multiple reset while the company's operating trajectory remains positive.

The strategic attraction is optical connectivity. AI clusters require exponentially more bandwidth between accelerators, racks and data centers. As accelerator performance rises, connectivity becomes a limiting factor. That places optical transceivers, lasers, photonics and datacom components directly in the AI capital-spending stream.

My price map

COHR	Action
$265–$280	Buy first tranche
$245–$260	Strong add
$225–$240	Aggressive add if fundamentals intact
>$315	Stop chasing; reassess

I would expect the first meaningful rerating to take COHR toward approximately $320–$340. A successful FY2027 ramp could eventually justify $375–$425+.

The risk is that optical components remain cyclical. If hyperscaler capex suddenly slows, COHR's multiple can contract rapidly.

12-month working range: $360–$425.

2. Celestica — CLS

Best combination of quality and growth

Celestica may be the strongest business in this group at today's price.

The company has raised 2026 revenue guidance to $20.5 billion and adjusted EPS guidance to $11.30, representing expected year-over-year growth of approximately 65% and 87%, respectively. Management has also said it expects growth to accelerate again in 2027.

At approximately $296, that $11.30 EPS outlook implies a price-to-current-guidance ratio of roughly:

$296 ÷ $11.30 ≈ 26.2×

For a company producing that level of earnings growth, that is considerably more reasonable than the headline stock chart suggests.

CLS's 52-week range is roughly $183.66–$474.02, putting the shares almost 38% below the high.

My price map

CLS — NYSE	Action
$285–$305	Buy
$265–$280	Strong add
$245–$260	Exceptional opportunity if outlook unchanged
>$340	Don't chase

For Canadians, the TSX listing is particularly useful. The investment thesis is the same; currency simply changes the quoted share price.

12-month working range: $375–$450.

I would not require CLS to revisit its previous $474 high for this investment to work very well.

3. Micron — MU

The most unusual dislocation of the group

This is where our hedge-fund discussion matters.

Micron was indeed one of the enormous positions held by Situational Awareness, the highly leveraged AI-focused fund that suffered a 67% July loss and was pressured to liquidate most of its roughly $16 billion public-equity portfolio. Citadel purchased much of that portfolio and subsequently disposed of more than 80% of its acquired risk. Reuters confirms the forced unwind.

More specifically, the fund's June filings showed Micron and SanDisk accounting for more than 56% of the portfolio. Micron subsequently fell roughly 24% in July.

So this is one situation where we can reasonably say:

At least part of the selloff was related to portfolio mechanics and leverage rather than Micron's operating performance.

Micron's latest reported quarter was extraordinary: revenue of $41.46 billion, non-GAAP EPS of $25.11 and operating cash flow of $25.39 billion.

MU closed September 1 at $933.44, down 2.64% for the day.

My price map

MU	Action
$900–$950	First tranche
$850–$890	Strong add
$800–$840	Aggressive add
>$1,025	Wait for consolidation

I would not buy a full MU position at once because memory is notoriously cyclical and expectations have risen enormously.

Nevertheless, this may be the stock with the best chance of a violent rebound if investors conclude the July forced-selling episode has completely cleared.

12-month working range: $1,150–$1,350, with materially greater upside possible if HBM pricing remains unusually strong.

A correction to our earlier hedge-fund discussion

After checking the primary/current reporting more carefully, I would refine what I told you earlier.

There is strong evidence for forced selling affecting MU, and there is evidence that Bloom Energy was also a major Situational Awareness holding. The fund's other disclosed major holdings included SanDisk, Taiwan Semiconductor and Nebius.

I do not have equivalent evidence tying COHR or CLS directly to that forced liquidation.

So I would no longer characterize their corrections as proven consequences of the Situational Awareness unwind.

That distinction matters.

4. Marvell — MRVL

The stock that almost breaks into the top three

MRVL is becoming increasingly difficult to ignore.

It reported record fiscal Q2 2027 revenue of $2.739 billion, up 37% year over year, while data-center revenue growth accelerated to 46%. Management said AI-related bookings remain exceptionally strong and expects growth to accelerate through the remainder of fiscal 2027.

Yet the shares suffered a severe post-earnings correction.

MRVL closed at $241.45 on August 27, fell more than 10% on August 28, and finished September 1 at $210.40.

That is exactly the type of earnings-related dislocation I look for.

Entry strategy

$200–$215 is attractive.

Below $195, I would become significantly more aggressive provided no customer-loss information emerges.

MRVL is particularly interesting because it touches both sides of the AI infrastructure equation:

custom accelerators and high-speed connectivity.

12-month working range: $270–$325.

If you asked me which stock could displace MU from the top three, MRVL would be the one.

5. Qualcomm — QCOM

The sleeper

QCOM closed September 1 at only $166.61.

That valuation reflects the market's continuing tendency to treat Qualcomm primarily as a smartphone-chip company.

But Qualcomm is increasingly positioning itself across:

edge AI,
automotive,
robotics,
industrial systems,
PC computing,
and now data-center AI.

Its investor materials explicitly highlight a comprehensive data-center roadmap, while the company continues expanding its AI/high-performance-compute positioning.

This is therefore the stock in the ten where the AI optionality is least fully priced in.

That doesn't make QCOM the stock most likely to surge tomorrow. It makes it one of the best asymmetric opportunities if the market begins assigning value to its data-center effort.

My entry range

$160–$170: Buy.

$150–$158: Strong buy.

Below $150 without a fundamental deterioration would be especially attractive.

12-month working range: $205–$235.

For a multi-year Physical-AI portfolio, I would actually rank QCOM above several stocks that rank higher here on short-term momentum.

6. Vertiv — VRT

The picks-and-shovels power winner

AI accelerators are useless without power conversion, thermal management and cooling.

Vertiv sits almost perfectly in this bottleneck.

Q2 was strong enough for management to raise full-year guidance. It now expects approximately $14 billion in 2026 sales, around 31% organic growth, and adjusted EPS of approximately $6.65–$6.75, roughly 60% above 2025 at the midpoint.

At $255.97, however, that implies roughly:

$255.97 ÷ $6.70 ≈ 38× adjusted 2026 EPS.

That is why VRT ranks #6 rather than #2.

The company is excellent.

The valuation is still demanding.

Shares have nevertheless fallen about 20% over the preceding three months.

Entry range

$240–$255: acceptable starter.

$220–$235: very attractive.

Below $215: strong buy, assuming guidance holds.

12-month working range: $310–$350.

7. Broadcom — AVGO

Possibly the best AI company here—but not necessarily the best entry today

Broadcom's fundamentals are astonishing.

Fiscal Q2 AI semiconductor revenue reached $10.8 billion, increasing 143% year over year, driven by custom AI accelerators and networking.

That is precisely where the AI capex cycle is going.

But AVGO reports September 2, meaning buying aggressively tonight would effectively be making an earnings-event bet. Broadcom closed September 1 around $368.55 and remains well below its $495 52-week high.

I therefore prefer:

wait for tomorrow's earnings reaction.

A good report followed by a sell-the-news decline could give us a much better entry.

12-month working range: $440–$500, subject to tomorrow's numbers.

8. Credo — CRDO

Tremendous growth, dangerous expectations

Credo is one of the purest AI-connectivity companies available publicly.

Its just-reported fiscal Q1 2027 revenue was $479 million, up 114.7% year over year, while non-GAAP net income increased approximately 140%.

Yet CRDO fell 8.65% today, closing at $206.63, after already declining sharply from the $280 area in mid-August.

This is interesting—but different from CLS.

CRDO carries much more valuation risk because the market already recognizes the growth story.

Entry range

$195–$210: starter.

$175–$190: meaningful buy.

Below $170: potentially very attractive.

I would not build the entire position today.

12-month working range: $260–$310.

9. Applied Optoelectronics — AAOI

High-risk optical torque

AAOI is the smallest and most speculative optical-networking idea on this list.

The shares closed September 1 at $103.39, down about 4%, versus a 52-week range of roughly $18.50–$233.67.

That enormous range tells you almost everything you need to know about the risk.

If AI optical transceiver demand remains strong and AAOI executes manufacturing expansion correctly, the upside can be enormous.

But this is not COHR.

The balance sheet, customer concentration, margins and execution risk justify a substantially smaller position.

Entry range

$95–$105: speculative starter.

$80–$90: attractive speculation.

I would limit AAOI to perhaps 3–5% of an AI infrastructure basket.

12-month working range: $140–$180, but with unusually wide error bars.

10. Bloom Energy — BE

Fantastic theme; difficult stock price

Bloom's underlying growth is extraordinary.

Q2 revenue reached $1.065 billion, increasing 166% year over year, and management raised full-year revenue guidance to $3.9–$4.2 billion, approximately 100% growth at the midpoint.

And there is a forced-selling angle here too: Bloom was among Situational Awareness's significant holdings and dropped roughly 31% during the July AI unwind.

BE subsequently recovered and closed September 1 at $213.63.

So why only #10?

Because the valuation now assumes a tremendous amount of future success.

The business opportunity may be one of the largest in the entire portfolio, but price discipline is essential.

Entry range

$180–$195: interesting.

$160–$175: buy.

Below $155: strong speculative buy.

At $213+, I would wait.

The portfolio I am planning to construct

If the objective is maximum reasonable alpha rather than simply owning all ten equally, I would not use a 10%/10%/10% structure.

For a hypothetical CAD $100,000 AI-infrastructure portfolio, mine would look approximately like this:

Company	Weight	CAD amount	Role
COHR	17%	$17,000	Optical connectivity
CLS	17%	$17,000	AI hardware infrastructure
MU	14%	$14,000	Memory/HBM
MRVL	12%	$12,000	ASIC/network silicon
QCOM	11%	$11,000	AI optionality / Physical AI
VRT	9%	$9,000	Power/cooling
AVGO	8%	$8,000	Custom compute/networking
CRDO	5%	$5,000	High-speed connectivity
AAOI	3%	$3,000	High-beta optical
BE	4%	$4,000	Distributed power

That puts 71% of the portfolio in my top five.

I prefer that concentration because the purpose of this portfolio isn't index-like diversification. It is targeted participation in the physical infrastructure bottlenecks created by AI.

But I would not invest the $100,000 today

This is perhaps the most important part of the report.

With Treasury yields rising, equities weak on September 1, and September historically prone to volatility, I would deploy approximately:

Stage 1 — Now: 40%

Establish COHR, CLS, MU, MRVL and QCOM.

Small VRT/CRDO positions are a maybe.

Stage 2 — Another 5–8% sector correction: 30%

Add primarily to whichever of COHR / CLS / MRVL / QCOM falls without a corresponding earnings deterioration.

Stage 3 — Capitulation or catalyst confirmation: 30%

Use this after either:

a genuine September washout,

or evidence that the AI-infrastructure group has established a higher low and resumed leadership.

This avoids the two mistakes investors commonly make during a correction:

waiting forever for the absolute bottom, or

spending all available cash during the first decline.

The three I am looking to buy by next week

If you wanted to keep this exceptionally simple and buy only three,

🥇 COHR

Best rebound setup

$272 is already deep in my preferred first-entry zone.

Its business is growing while its stock has fallen roughly 38% from the high. The connectivity bottleneck is real, and management's FY2027 opening-quarter guidance remains strong.

🥈 CLS

Best business-quality setup

At approximately 26× management's $11.30 EPS guidance, with projected EPS growth approaching 90%, I think the risk/reward is exceptional if Celestica executes.

🥉 MU

Best forced-liquidation/recovery setup

The hedge-fund liquidation is real—not merely speculation—and MU's financial performance is dramatically stronger than its July price action suggested.

Investing a moderate $25,000 as an example

Given today's prices, and although MRVL has become much more attractive after its post-earnings drop.

I like this allocation as entry positions:

Position	Ultimate allocation	Initial purchase now
COHR	$10,000	$5,000
CLS	$8,750	$4,500
MU	$6,250	$2,500
Cash held back	—	$13,000

So I would put about $12,000 to work now and retain roughly $13,000.

If September gives us another 7–10% AI-infrastructure flush, that cash becomes extremely valuable.

And if the market simply turns higher?

A retail investor would already own meaningful starter positions.

Which one is most likely to “pop” first?

My ranking over the next 30–90 days is slightly different from my long-term ranking:

Rank	Stock	Why
1	MU	Forced-selling overhang + enormous HBM earnings + potential technical snapback
2	COHR	Large drawdown + optical-networking rerating
3	MRVL	Fresh post-earnings dislocation
4	CLS	Fundamentals increasingly difficult for market to ignore (Canadian gem)
5	CRDO	Highest beta if connectivity trade resumes

Over 12–24 months, however, I would put CLS and COHR ahead of MU because their growth is less dependent on memory-cycle economics.

What could invalidate this entire thesis?

There are five things that would negatively impact this scenario!

Hyperscaler capex cuts. If Microsoft, Meta, Amazon, Google, Oracle or xAI start materially reducing AI infrastructure budgets, almost everything in this portfolio gets hit. (moderate risk)
Long-duration rates. Today's bond-market selloff matters. Higher yields compress the multiples investors will pay for fast-growth technology. (watch this)
Networking oversupply. A sudden inventory build would hit COHR, CRDO and AAOI disproportionately.(Minimal risk)
Memory pricing reversal. MU's earnings are spectacular precisely because memory economics have become spectacular. That cuts both ways.(Moderate)
AI architecture becoming materially less infrastructure-intensive. This is the existential risk to the entire “trillions of dollars of physical AI infrastructure” thesis.(Moderate risk)

None of those is my base case today.

My September hierarchy

Starter positions by next week

COHR — CLS — MU — MRVL — QCOM

Buy on weakness

Riskier at present

CRDO — AAOI

Wait for a better price

And the most important conclusion from this exercise is that we do not need NVIDIA to keep winning at the same rate for this portfolio to work.

In fact, its strongest scenario may be one in which AI spending keeps climbing but the economic value begins migrating away from the GPU itself toward...

memory, optics, networking, custom silicon, electrical infrastructure and cooling.

COHR, CLS, MU and MRVL now give us four particularly compelling ways to own it at materially reset prices.

I am treating $265–280 COHR, $285–305 CLS and $900–950 MU as actionable first-entry zones right now, while keeping roughly half the intended capital available for September volatility.

Saturday, August 29, 2026

Xanadu Photonic Quantum Technology

Xanadu Photonic Quantum Technology on Canadian Government radar! XNDU

Canada Makes a Major Bet on Photonic Quantum Computing

August 29, 2026

Investment View: Speculative - Accumulating

Canada has just made what may prove to be one of the most consequential commitments yet to its domestic quantum-computing industry.

On August 28, 2026, the Government of Canada announced C$195 million in federal support for Xanadu Quantum Technologies (NASDAQ/TSX: XNDU) through Canada's Strategic Response Fund. The money will support Xanadu's ambitious C$893 million Project OPTIMISM, designed to create advanced photonic and semiconductor manufacturing capabilities in Canada.

For investors considering purchasing XNDU shares, we believe this announcement materially improves the investment thesis.

It does not eliminate the considerable technological and financial risks associated with Xanadu. The company remains early-stage, deeply unprofitable and years away from proving that its photonic architecture can become a commercially useful fault-tolerant quantum computer.

But the federal commitment substantially strengthens Xanadu's financial, industrial and strategic position.

Our conclusion: XNDU has moved higher on our list of investable speculative quantum companies, and we would consider establishing a starter position around current levels rather than waiting for perfect certainty.

The C$195 Million Announcement

The federal government has committed C$195 million toward Xanadu's C$893 million expansion project.

This distinction is important:

Canada is not simply buying C$195 million of XNDU stock.

The funding is project support through the Strategic Response Fund and is subject to conditions, eligible expenditures and milestones. It therefore should not be treated as C$195 million of unrestricted cash suddenly appearing on Xanadu's balance sheet.

Nevertheless, its strategic significance is substantial.

The government says the project will create approximately 275 high-quality jobs and establish capabilities for integrating, packaging, testing and assembling sophisticated photonic and semiconductor components required for future quantum systems.

In other words, Canada isn't merely funding another quantum research program.

It is helping Xanadu build quantum manufacturing infrastructure.

That is a very different proposition.

Project OPTIMISM

The centerpiece is Project OPTIMISM, Xanadu's plan to develop the manufacturing infrastructure necessary to move photonic quantum computing from laboratory-scale experimentation toward industrial production.

Earlier this year, Xanadu disclosed discussions with the governments of Canada and Ontario for as much as C$390 million of combined government support.

The newly signed C$195 million agreement represents the full federal portion of that contemplated support.

That means investors should now watch Ontario closely.

If another substantial provincial commitment is ultimately finalized, government support for Project OPTIMISM could become considerably larger.

Meet "Inception"

One of the most important consequences of the federal commitment will be...

Xanadu's new advanced-photonics facility in Toronto.

It has been named Inception.

The planned 158,000-square-foot facility is being designed for research, development and manufacturing of photonic quantum-computing components.

Its proposed capabilities include:

• Advanced cleanrooms
• Photonic component manufacturing
• Semiconductor packaging
• Quantum-module assembly
• Wafer-level testing
• 24-hour test and measurement capabilities
• Heterogeneous photonic integration
• Systems integration and verification

That last manufacturing capability—heterogeneous integration—is particularly important.

Xanadu ultimately needs to combine numerous specialized photonic components into highly integrated, manufacturable systems.

If Inception succeeds, Xanadu could control substantially more of the critical manufacturing chain required for its quantum computers.

This starts to make Xanadu look less like a quantum research laboratory and more like a future vertically integrated quantum-computing manufacturer.

Why Photonic Quantum Computing Matters

Most investors associate quantum computing with superconducting or trapped-ion systems.

Xanadu is pursuing something fundamentally different:

It uses light!

Photons carry quantum information through optical circuits.

That architecture potentially provides several major advantages.

Photonic systems can exploit semiconductor-style manufacturing processes, offer excellent networking characteristics and avoid some of the extreme cooling requirements associated with superconducting quantum processors.

Most importantly, photonics lends itself naturally to modular and networked quantum architectures.

That could become enormously important.

Rather than trying to manufacture one gigantic monolithic quantum processor, Xanadu's long-term strategy is to connect multiple quantum modules together into progressively larger systems.

Its Aurora system was an important demonstration of this concept.

Xanadu describes Aurora as the first modular, networked photonic quantum computer with

real-time error correction.

The company subsequently demonstrated 12 logical GKP qubits with real-time error correction and reported a 60% reduction in optical loss during 2025, representing approximately a twentyfold improvement over three years.

That does not mean Xanadu has solved fault-tolerant quantum computing.

It means it has demonstrated pieces of the architecture required to attempt it.

The Roadmap

Xanadu's stated objective is aggressive.

The company is targeting increasingly sophisticated fault-tolerant operations through 2028 and ultimately:

Up to 100,000 physical qubits

Up to 500 logical qubits

Target period: 2029–2030

Management believes that level could begin providing commercially meaningful quantum-computing capabilities.

This is the central investment proposition.

If Xanadu can actually demonstrate hundreds of high-quality logical qubits, today's company could look dramatically different.

But investors should treat 500 logical qubits as a roadmap objective—not an accomplished result.

Execution over the next three to four years will determine whether XNDU ultimately becomes an important quantum-computing company or simply another promising architecture that failed to scale.

PennyLane: Xanadu's Underappreciated Asset

Xanadu isn't exclusively a hardware company.

It also created PennyLane, an open-source quantum software platform.

PennyLane had grown to approximately 160,000 average monthly downloads by the end of 2025, up 161% year over year.

This is strategically important.

PennyLane is designed to work across different quantum hardware modalities.

Xanadu can therefore establish relationships with developers and researchers without requiring everyone using its software to own or access a Xanadu quantum computer.

We regard PennyLane as an important piece of the investment thesis because successful computing platforms frequently create value simultaneously at the:

hardware + software + developer ecosystem

levels.

Financial Position

The financial numbers illustrate both the opportunity and the danger.

As of June 30, Xanadu reported:

Cash: US$312.8 million
Q2 revenue: US$1.5 million
Q2 R&D expense: US$19.7 million
Q2 adjusted EBITDA loss: US$21.3 million
Q2 net loss: US$42.1 million

The company therefore has a substantial cash position but remains a pre-commercial technology company.

Revenue is almost irrelevant compared with the company's multibillion-dollar equity valuation.

Investors buying XNDU today are not buying current earnings.

They are buying intellectual property, scientists, photonic technology, manufacturing capability, PennyLane, government relationships and—above everything else—the probability that Xanadu's architecture eventually works at commercial scale.

The Dilution Issue

This remains one of our largest concerns.

In May, Xanadu established a US$300 million synthetic at-the-market equity facility.

During Q2 alone it raised approximately US$67.2 million, issuing 5.5 million shares at an average net price of US$12.28.

XNDU therefore possesses additional access to capital—but existing investors need to recognize that further use of this facility means additional dilution.

This is another reason the Canadian government contribution matters.

To the extent that government support pays for infrastructure that otherwise would have required Xanadu to raise additional equity, government funding potentially reduces the amount of shareholder dilution necessary to execute the roadmap.

That may ultimately prove almost as important as the C$195 million itself.

Why Canada's Decision Matters Beyond the Money

We think investors should interpret the announcement in three ways.

1. Technology validation

The Canadian government has performed sufficient diligence to commit a very substantial amount of public funding to Xanadu's manufacturing strategy.

Government approval obviously doesn't prove that Xanadu's technology will succeed.

But C$195 million represents significantly more validation than a small research grant.

2. Strategic importance

Quantum computing is increasingly becoming a matter of national security and technological sovereignty.

Canada specifically connected the Xanadu investment with its National Quantum Strategy and Defence Industrial Strategy.

Xanadu therefore increasingly looks like a strategic Canadian technology asset rather than simply another venture-backed quantum startup.

3. Manufacturing moat

Quantum computing ultimately requires more than good physics.

It requires manufacturing.

Project OPTIMISM could give Xanadu domestic capabilities in photonic integration, semiconductor packaging, testing and quantum-system assembly that would be difficult and expensive for competitors to replicate.

That could become a meaningful competitive moat.

The Investment Case

We see six major reasons to consider buying XNDU:

1. Differentiated photonic architecture

Xanadu provides exposure to an architecture fundamentally different from trapped-ion and superconducting systems.

2. Natural networking capability

Photonic systems are particularly well suited to modular quantum architectures and quantum networking.

3. Fault-tolerance strategy

Xanadu has already demonstrated logical GKP qubits with real-time error correction and continues working toward progressively larger fault-tolerant systems.

4. Government backing

The C$195 million federal commitment dramatically strengthens the credibility and financing of its Canadian manufacturing strategy.

5. PennyLane

Xanadu possesses a meaningful quantum software ecosystem in addition to its hardware.

6. Asymmetric upside

If photonics ultimately becomes one of the dominant architectures for fault-tolerant quantum computing, Xanadu is one of the relatively few publicly traded pure plays positioned to benefit.

What Could Go Wrong?

XNDU remains highly speculative.

The biggest risks are straightforward.

Technology risk

Photon loss remains a fundamental engineering challenge. Xanadu must prove that its architecture can scale while maintaining sufficiently low error rates.

Timeline risk

Commercially useful fault-tolerant quantum computers may arrive substantially later than expected.

Competition

Xanadu is competing against extraordinarily well-financed organizations and alternative architectures, including trapped ions, neutral atoms and superconducting systems.

Revenue risk

Current revenue is tiny relative to the company's valuation.

Dilution

XNDU will probably require substantial additional capital before becoming sustainably profitable.

Government funding conditions

The C$195 million should not be viewed as an unconditional cash transfer. Payments are associated with eligible expenditures, conditions and project execution.

One Near-Term Catalyst Investors Should Watch

Timing is unusually interesting.

Xanadu has scheduled a Technology Roadmap Presentation for Monday, August 31, 2026 at 1:00 p.m. ET.

Management says the event will provide detailed information concerning its technological roadmap and path toward large-scale fault tolerance.

That presentation could be more important to the investment thesis than a normal quarterly earnings report.

Investors should listen specifically for:

logical-qubit milestones;

photon-loss improvements;

fault-tolerance timelines;

manufacturing milestones for Inception;

2027–2028 hardware objectives;

and any clarification of the path toward 500 logical qubits in 2029–2030.

Our Buying Strategy

We would not chase XNDU aggressively if Friday's C$195 million announcement produces a large gap higher when markets reopen.

Instead, we would build the position in stages.

At roughly the US$10 area where the shares have recently traded, we regard XNDU as an attractive speculative entry.

Our approach would be:

First purchase — 30% to 35% of intended position

Establish exposure around current levels provided the government announcement does not cause an extreme spike.

Second purchase — approximately 30%

Add following the August 31 technology presentation if management's roadmap strengthens our confidence.

Final 35% to 40%

Reserve for either a market/quantum-sector pullback or confirmation of another major technological, government or commercial milestone.

We would rather pay slightly more after genuine technological confirmation than commit the entire position before that confirmation occurs.

XNDU vs. Other Quantum Holdings

XNDU should not necessarily replace a company such as IonQ.

We think the two can complement one another.

IONQ: trapped-ion architecture + networking + acquisitions + growing commercial/government ecosystem.

XNDU: photonics + modular architecture + semiconductor-style manufacturing + PennyLane + major Canadian government support.

That provides exposure to two fundamentally different approaches to fault-tolerant quantum computing.

The attraction is diversification by quantum architecture, not merely diversification by ticker symbol.

Investment Rating

XNDU — SPECULATIVE BUY

Technology: 9/10
Strategic positioning: 9/10
Government support: 9.5/10
Balance sheet/funding access: 8/10
Current commercial business: 3/10
Valuation certainty: 3/10
Execution risk: High
Long-term upside: Very High

Overall speculative investment rating: 8.5/10

Bottom Line

The Canadian government's C$195 million commitment changes the XNDU investment thesis for the better.

The most important aspect isn't simply the money.

Canada is helping Xanadu construct the physical infrastructure necessary to attempt the transition from quantum research company to quantum manufacturer.

Project OPTIMISM and the new Inception facility could give Xanadu something extremely valuable if photonic quantum computing succeeds:

An integrated Canadian manufacturing base capable of producing, packaging, testing and assembling the photonic components required for large-scale fault-tolerant quantum systems.

The company remains speculative. Revenue is tiny, losses are substantial, dilution remains possible, and the ultimate technological outcome is far from certain.

But the equation has changed.

The Government of Canada is effectively helping shoulder part of the enormous capital burden required to find out whether Xanadu's architecture can work at industrial scale. Existing shareholders retain the upside if it does.

For an investor willing to accept substantial volatility and a multi-year horizon, we believe XNDU around current levels merits a starter position.

The C$195 million commitment makes us more—not less—comfortable buying XNDU, provided the position is sized as a speculative quantum investment rather than a conventional established technology holding.

Ed Note: Placed on our watch list for now! Awaiting the Monday announcement and the (most likely) bump in stock price to reside.

Our preferred strategy: initiate approximately one-third of the desired position, evaluate Monday's technology roadmap presentation, and build toward a full position as Xanadu demonstrates that government funding is being converted into measurable technological and manufacturing progress.

Thursday, August 27, 2026

Drones and Drone technologies are in a massive growth market. We now own four small caps in that market!

Building a Four-Company Autonomous Systems & Drone Technology Portfolio

August 27, 2026

Volatus Aerospace • Ondas • Kraken Robotics • WRAP Technologies

We have established positions or starter positions in four companies that collectively give us exposure to what we believe is becoming a major new investment theme: the rapid adoption of autonomous systems across defence, surveillance, public safety, critical infrastructure and maritime security.

The four are:

Company	Symbol	Primary Exposure
Volatus Aerospace	TSX: FLT	Aerial drones, ISR, autonomy, Canadian defence
Ondas Inc.	NASDAQ: ONDS	Autonomous drones, counter-UAS, tactical defence systems
Kraken Robotics	TSXV: PNG	Underwater autonomy, sonar, subsea batteries, naval systems
WRAP Technologies	NASDAQ: WRAP	Counter-UAS, threat detection, directed energy, public safety

The important point is that we are not simply buying four drone stocks.

We are assembling exposure to four different layers of the autonomous-security ecosystem: air, underwater, counter-drone/defence and public safety/security.

That diversification is precisely why we find the group attractive.

The Investment Thesis

The war in Ukraine has demonstrated something defence planners can no longer ignore: relatively inexpensive autonomous systems can destroy, disable or threaten military assets costing tens or hundreds of millions of dollars.

At the same time, autonomous systems are moving beyond conventional warfare into border surveillance, Arctic sovereignty, infrastructure inspection, wildfire response, policing, maritime surveillance, mine countermeasures and protection of pipelines, ports and subsea communications cables.

Canada itself has now launched a Defence Drone Initiative covering tactical ISR drones, autonomous ground vehicles, unmanned maritime systems and counter-drone systems.

That creates an unusually broad investment opportunity.

Rather than attempting to determine which single drone manufacturer becomes the industry's dominant supplier, our approach is to own several companies occupying different strategic positions within the autonomous systems value chain.

And these four companies are very different businesses.

1. Volatus Aerospace — TSX: FLT

Canada's Emerging Sovereign Drone Platform

Volatus Aerospace

Volatus remains our Canadian aerial-drone play and arguably the most speculative of our Canadian autonomous-system investments.

But the business is changing.

Volatus is attempting to evolve from primarily being a drone operator, distributor and services company into a vertically integrated Canadian aerospace and defence company possessing manufacturing, autonomous flight technology, software, training and operational capabilities.

That transition is the principal reason we own it.

Mirabel changes the story

Volatus opened its 53,000-square-foot manufacturing and systems-integration facility at Montreal-Mirabel in June.

The facility gives the company something increasingly important in the current geopolitical environment:

sovereign Canadian manufacturing capability.

Canada wants substantially greater domestic defence production. Volatus is positioning itself to manufacture and integrate autonomous aircraft inside Canada rather than merely importing and operating foreign drones.

Volatus has also introduced its proprietary V-Cortex AI flight controller and autonomy operating system, while its SKYDRA counter-UAS software adds another potentially higher-margin layer.

The strategy is becoming considerably more interesting:

aircraft + autonomy + software + manufacturing + training + operations.

The K1000ULE opportunity

Another major development is Volatus's August partnership with Kraus Hamdani Aerospace.

The companies plan to introduce the K1000ULE ultra-long-endurance autonomous aircraft and ATNE++ resilient communications technology into Canada, with Volatus handling systems integration, deployment, training and lifecycle support while progressively establishing Canadian manufacturing at Mirabel.

That could become particularly important for Canada's enormous Arctic surveillance problem.

Long-endurance autonomous aircraft potentially provide persistent surveillance at dramatically lower operating costs than continuously deploying crewed aircraft.

Financial position

Volatus remains early-stage financially.

Q2 revenue was C$8.4 million and adjusted EBITDA was a C$4.35 million loss. H1 revenue was C$14.0 million and the company recorded a C$14.1 million net loss.

But the balance sheet has changed dramatically.

Following its financing, Volatus finished Q2 with approximately C$59.2 million of cash and C$63.8 million of working capital, its strongest liquidity position historically.

That gives management something it previously lacked: sufficient capital to pursue the defence opportunity without constantly worrying about immediate financing requirements.

Why we own FLT

Volatus is essentially an investment in the proposition that Canada will require a domestically controlled autonomous-aircraft industry.

If Volatus captures a meaningful Canadian Armed Forces, Coast Guard, Arctic surveillance or NATO-related program, today's relatively small revenue base could change quickly.

That is also the risk.

Volatus still has to prove that its rapidly expanding capabilities translate into large contracts, growing revenue and eventually profitability.

Our classification: High-risk / potentially high-reward strategic position.

2. Ondas — NASDAQ: ONDS

The Fast-Growing Autonomous Defence Platform

Ondas

There is one important clarification regarding Ondas.

Although much of the technology and operational heritage comes from Israel — particularly through Airobotics — Ondas itself is a U.S.-listed American company with both U.S. and Israeli operating subsidiaries. Airobotics Ltd. is its Israeli subsidiary.

Ondas has also become a much larger and more diversified autonomous-defence company than it was even a year ago.

And financially, the transformation has been remarkable.

Q2 changes the investment case

Ondas reported Q2 2026 revenue of $83.8 million, up 67% sequentially and more than thirteen-fold year-over-year.

More importantly, it reported approximately:

$175 million of new Q2 orders

and

$613 million of backlog at June 30.

Including the subsequently completed DZYNE and Cyberhawk acquisitions, pro-forma backlog reached approximately $757 million.

Ondas also reported another $105 million of orders already captured in Q3 through August 10 and raised its 2026 revenue target to $525–550 million.

Those numbers move ONDS beyond being simply an interesting drone technology speculation.

There is now considerable commercial validation behind the story.

Israeli defence validation

On August 11 Ondas announced another significant development.

It was selected by the Israeli Ministry of Defense for the Digital Bat program to develop and produce a next-generation low-cost tactical attack drone system.

That is particularly important because Israel has arguably accumulated more real-world operational drone and counter-drone experience than almost any Western-aligned military.

Technology that succeeds there can potentially migrate into U.S., NATO and allied defence programs.

Systems-of-systems strategy

Ondas is increasingly moving beyond selling individual autonomous aircraft.

Its objective is to connect sensors, drones, counter-UAS systems, ground robotics, communications and AI-driven command-and-control software.

That creates the possibility of considerably higher-value contracts.

Instead of selling the military a drone, Ondas wants to sell an autonomous battlefield architecture.

That distinction is important.

Why we own ONDS

Of our four companies, Ondas currently appears to have the strongest near-term revenue-growth trajectory.

It also has substantially greater diversification following its acquisitions.

The principal risks are acquisition integration, valuation, execution and the enormous complexity created by expanding this quickly.

Nevertheless, backlog approaching three-quarters of a billion dollars gives us considerably greater confidence than we would have had in ONDS twelve months ago.

Our classification: Aggressive growth / strongest current operating momentum.

3. Kraken Robotics — TSXV: PNG

Owning the Underwater Battlefield

Kraken Robotics

Kraken is sometimes grouped with drone companies, but that description substantially understates what the company has become.

Kraken supplies the technologies that allow autonomous underwater vehicles to see, navigate, map and remain powered underwater.

Those capabilities are becoming increasingly strategic.

The oceans contain enormous amounts of critical infrastructure: telecommunications cables, pipelines, offshore energy infrastructure and military assets.

Meanwhile, NATO navies are rapidly expanding their use of unmanned underwater vehicles for mine countermeasures, seabed surveillance and reconnaissance.

Kraken sits directly inside that transition.

Three strategic technologies

The core investment thesis revolves around:

Synthetic aperture sonar

Kraken's AquaPix technology provides extremely high-resolution seabed imagery.

KATFISH

Its actively controlled towed sonar platform can perform high-resolution mine detection and seabed mapping.

Pressure-tolerant batteries

Autonomous underwater vehicles require enormous amounts of energy. Kraken's subsea battery technology therefore provides exposure not simply to one UUV manufacturer but potentially to the entire expansion of autonomous underwater systems.

That picks-and-shovels characteristic is particularly attractive.

Today's Q2 results strengthen the thesis

Kraken released Q2 results today, August 27.

Revenue reached C$27.3 million, gross margin reached an impressive 59%, and adjusted EBITDA was C$5.0 million.

More importantly, announced 2026 orders across Kraken and Covelya have now reached approximately C$355 million.

Kraken also disclosed a long-term master supply agreement to provide subsea batteries to a major international conglomerate developing extra-large unmanned underwater vehicles — XL-UUVs.

That is exactly the type of contract we want to see.

Covelya transforms Kraken

Kraken completed its approximately C$615 million acquisition of Covelya Group on July 2.

The transaction brings Sonardyne, EIVA, Voyis, Wavefront and other underwater technology businesses into the group.

Management expects the combination to expand Kraken's addressable market, geographic reach, engineering capabilities and customer relationships, while generating approximately C$10 million of cost synergies within 24 months.

Kraken now expects 2026 revenue of approximately C$290–320 million and adjusted EBITDA of C$65–75 million.

That means Kraken is no longer the tiny Newfoundland sonar company it once was.

It is becoming a global subsea technology platform.

Why we own PNG

Kraken may actually represent the highest-quality underlying business of these four companies today.

It possesses proprietary technology, significant defence exposure, commercial customers, strong margins and positive adjusted EBITDA.

And unlike aerial drones — where dozens of companies compete — sophisticated underwater sensing and pressure-tolerant power systems have considerably higher technological barriers to entry.

Our classification: Core autonomous-defence technology holding.

4. WRAP Technologies — NASDAQ: WRAP

The Counter-Drone Wild Card

WRAP Technologies

WRAP is the smallest and most unconventional member of this portfolio.

Historically, investors knew WRAP primarily for BolaWrap, its non-lethal restraint technology used by law-enforcement agencies.

That is no longer the entire investment thesis.

Management is attempting to transform WRAP into a broader public-safety and defence technology company built around WrapShield.

And this is where the drone connection becomes important.

From policing into counter-UAS

WrapShield is intended to combine:

Detection → identification → decision-making → response.

WRAP is incorporating technologies including advanced sensing, passive RF detection and counter-UAS capabilities into the architecture.

On August 24 — only three days ago — WRAP announced that laser counter-UAS technology is being added to WrapShield, targeting Department of War, Homeland Security and tactical law-enforcement markets.

That potentially moves WRAP into one of the fastest-growing areas of defence technology:

How do we economically destroy or disable cheap hostile drones?

Using a $1-million missile to destroy a $10,000 drone is economically unsustainable.

Directed-energy systems potentially alter that equation dramatically.

Israeli technology pipeline

WRAP has also established a relationship with Israel's Frenel Imaging, giving it access to advanced thermal polarimetric imaging technology and potentially other Israeli security technologies.

Management describes its strategy as creating a pipeline whereby Israeli technologies can be identified, licensed or partnered and subsequently commercialized through WRAP into U.S. public-safety, federal and defence markets.

That strategy is intriguing — although still very early.

Financial picture

WRAP remains tiny.

Q2 revenue was only $2.1 million, although that represented 103% year-over-year growth.

Gross margin improved dramatically to approximately 75%, while the operating loss narrowed to approximately $2.3 million.

WRAP subsequently raised another $12 million from institutional investors to help expand WrapShield and its broader public-safety and defence strategy.

Those are encouraging developments.

But WRAP must still demonstrate that WrapShield can progress from an attractive collection of technologies into meaningful federal and defence contracts.

Why we own WRAP

WRAP provides something the other three companies do not.

Counter-UAS exposure.

If inexpensive drones proliferate globally, then technologies capable of detecting and defeating those drones should experience their own enormous demand cycle.

We therefore view WRAP as a relatively small venture-style public-market position rather than something that currently deserves the same portfolio weighting as Kraken or Ondas.

Our classification: Highest-risk / asymmetric counter-UAS option.

Why These Four Fit Together

This is what makes the portfolio particularly interesting.

Capability	FLT	ONDS	PNG	WRAP
Aerial autonomous systems	★★★	★★★	—	—
Tactical defence drones	★★	★★★	—	—
ISR / surveillance	★★★	★★★	★★★	★★
Counter-UAS	★★	★★★	—	★★★
Underwater autonomy	—	—	★★★	—
Naval / NATO exposure	★★	★★	★★★	★
AI/autonomy software	★★★	★★★	★★	★★
Canadian sovereignty	★★★	—	★★★	—
U.S. defence opportunity	★★	★★★	★★	★★★

Instead of betting on a single drone manufacturer, we are effectively investing in an autonomous-security stack.

AIR

Volatus + Ondas

SEA

Kraken

COUNTER-DRONE / DEFENCE

Ondas + WRAP

SENSORS, SOFTWARE & AUTONOMY

All four

That is the central rationale behind owning the group.

How We Currently Rank Them

From an investment-quality standpoint rather than simply potential percentage upside, our ranking today would be:

1. Kraken Robotics — 9.2/10

The most mature business, strong technological moat, high margins, rapidly expanding defence opportunity and the transformative Covelya acquisition.

2. Ondas — 8.9/10

The strongest current growth trajectory. The enormous increase in revenue, orders and backlog substantially strengthens the investment thesis. Acquisition integration and valuation remain important risks.

3. Volatus Aerospace — 8.2/10

Perhaps the most interesting Canadian asymmetric opportunity. Mirabel, V-Cortex, K1000ULE and Canadian defence spending could create a very different company over the next several years. Execution and profitability remain the principal questions.

4. WRAP Technologies — 7.4/10

Potentially enormous upside if WrapShield becomes a credible counter-UAS/federal-security platform, but considerably less commercially proven than the other three. This is precisely the type of investment where a starter position rather than a full position makes sense.

Portfolio Strategy

We would not equal-weight these four companies.

They are at completely different stages of development.

For every $100 allocated to this theme, our preferred aggressive weighting today would be approximately:

Company	Allocation	Role
Kraken Robotics	35%	Core position
Ondas	30%	Growth position
Volatus Aerospace	25%	Canadian asymmetric growth
WRAP Technologies	10%	Venture-style counter-UAS position

This weighting deliberately puts approximately two-thirds of the capital into Kraken and Ondas, where there is considerably more demonstrated revenue and backlog, while retaining meaningful exposure to the potentially much larger percentage upside available from Volatus and WRAP.

What Could Cause Us to Add

We would become more aggressive if the following catalysts occur.

Volatus: a material Canadian Armed Forces procurement, Arctic ISR program, K1000ULE deployment, significant NATO contract or evidence that Mirabel production is beginning to scale.

Ondas: continued backlog conversion, additional U.S./Israeli defence awards, successful DZYNE/Cyberhawk integration and demonstrated EBITDA profitability.

Kraken: major NATO mine-countermeasure awards, additional UUV battery agreements, successful Covelya integration and continued order growth.

WRAP: actual Department of War/DHS counter-UAS contracts, successful field demonstrations of WrapShield, meaningful directed-energy deployment or evidence that federal revenue is becoming material.

Those milestones matter more to us than short-term fluctuations in the respective share prices.

Principal Risks

There is a common danger running through this portfolio.

Autonomous defence has become a fashionable investment theme.

Markets frequently capitalize future contracts before they actually arrive.

Volatus and WRAP remain particularly dependent upon execution. Ondas must successfully digest rapid acquisitions and enormous growth. Kraken must integrate a C$615-million acquisition without destroying the operating discipline that made the original company attractive.

Government procurement is also notoriously slow.

Therefore these companies should not be evaluated simply on announcements, demonstrations, partnerships or memoranda of understanding.

Ultimately we want to see:

Orders → backlog → revenue → margins → cash flow.

Kraken is furthest along that progression.

Ondas is moving through it rapidly.

Volatus is approaching the crucial transition.

WRAP is still near the beginning.

Investment Conclusion

We believe autonomous systems represent something considerably larger than another technology cycle.

Drones are becoming consumable, intelligent machines.

Militaries will require thousands — eventually potentially millions — of autonomous systems operating in the air, on land, on the ocean and beneath it.

And every drone deployed creates secondary requirements for communications, sensors, batteries, autonomy software, surveillance systems and counter-drone technologies.

That is why we have chosen not to bet everything on one drone manufacturer.

We now have:

Volatus — Canadian autonomous air systems and sovereign manufacturing.

Ondas — rapidly scaling autonomous defence and tactical drone systems.

Kraken — the underwater sensing, power and autonomous naval infrastructure layer.

WRAP — the speculative counter-UAS and security response layer.

Together they provide a surprisingly comprehensive exposure to the emerging autonomous defence ecosystem.

Our present view is therefore constructive on all four, but not equally bullish on all four.

Kraken is the core. Ondas is the growth engine. Volatus is the Canadian asymmetric opportunity. WRAP is the venture-style option.

That distinction should determine position sizing.

And if the autonomous transformation of defence proceeds at anything close to the rate we currently expect, owning several of the enabling technologies rather than trying to predict the single winning drone manufacturer may ultimately prove to be the more durable investment strategy

The Takeover Factor

There is another reason we find this group attractive: consolidation across drone, autonomous and counter-drone technology is accelerating, making successful smaller companies increasingly plausible acquisition targets. Large defence primes and security companies need autonomous aircraft, subsea robotics, AI-enabled sensing, counter-UAS and specialized power systems faster than they can always develop them internally. Recent transactions demonstrate the appetite: Motorola Solutions agreed to acquire counter-drone specialist D-Fend Solutions for $1.5 billion, while Thales struck a deal for underwater-drone specialist Exail at an implied enterprise value of approximately €3.9 billion ($4.5 billion); Lockheed Martin has likewise moved to acquire Ultra Maritime, strengthening its position in sonar and autonomous maritime sensing.

That makes Kraken Robotics and Volatus Aerospace particularly interesting strategic assets in Canada. Kraken's sonar, subsea batteries, robotics and autonomous maritime capabilities could eventually attract interest from a major naval/defence contractor seeking immediate access to advanced underwater technology. Volatus could become attractive if its Canadian manufacturing base, autonomous aircraft, software and defence relationships translate into significant CAF/NATO programs—although Canada's desire to build sovereign defence champions could also make a foreign takeover politically sensitive. The broader Canadian policy environment is increasingly emphasizing domestic defence capability and reduced dependence on foreign suppliers.

WRAP could be a different type of target: if its counter-UAS and WrapShield strategy gains meaningful government adoption, it could fit naturally inside a much larger public-safety, defence-electronics or security company. The $1.5-billion D-Fend transaction provides a useful real-world indication of how strategically valuable proven counter-drone technology can become. Ondas, meanwhile, may be more likely to remain the acquirer than become the acquired. It has already been aggressively assembling an autonomous-defence platform through acquisitions including DZYNE, BIRD Aerosystems and Rotron Aerospace.

We therefore do not own any of these companies because we expect a takeover—that would be speculation rather than an investment thesis. But takeover optionality is valuable. If FLT, PNG or WRAP develops strategically important technology, wins major defence programs and establishes a difficult-to-replicate position, a larger contractor may eventually conclude that buying the company is faster and cheaper than trying to build the capability from scratch. In a defence industry now actively consolidating around AI, autonomy, drones and counter-drone systems, that possibility should not be ignored.

Ed Note:

We have also added to this portfolio one of the bigger fish in the sea (and sky)

AeroVironment, Inc.