2026 laggards shine in Wednesday's mixed stock market that kicked off the third quarter

An important development from the financial markets: Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks kicked off the new month , the third quarter, and the second half of the year on a mixed note. The market experienced a reversal session, with AI leaders and data center infrastructure buildout stocks falling while software and the hyperscalers rebounded.

The single biggest story Wednesday — Meta Platforms ' plans to build out a cloud computing business to monetize its data centers and other AI infrastructure. Shares soared over 10% on the news — first reported by Bloomberg and then confirmed by Jim Cramer — easing concerns that Meta was overspending on AI. That has been one of the biggest overhangs on the stock this year.

Economic Details

Thus far, Meta was only monetizing AI through its advertising, which is a great business but can be cyclical and was not enough to justify using all its cash flow. Meta was the only major hyperscaler without a cloud business ( Amazon has AWS, Microsoft has Azure, and Alphabet has Google Cloud), explaining why Jim has said several times ( including in his latest Sunday column ) that it needed a data center business. All four hyperscalers are holdings in the portfolio.

One part of the Meta story that still needs to be figured out is what this means for chip demand. CEO Mark Zuckerberg said at the company's annual meeting in May that if it got to the point where they felt like they overbuilt on data centers, an option would be to create a cloud business. So, is Wednesday's news a sign that Meta thinks they overbuilt capacity and therefore won't need as much capex in the future and bad for the AI stocks; or is this a strategic pivot to create new revenue streams?

We're not in the camp that industry-wide capex is going to fall. We think it's more likely that Meta is monetizing its data center infrastructure to immediately generate more profits and cash flow, giving it even more resources to invest in AI. Palo Alto Networks extended its recent run of strong gains after analysts at Wells Fargo raised its price target on the Club cybersecurity name to $420 from $325 and named it an overweight tactical buy idea for the third quarter.

Analyst Views

Palo Alto Networks stock has put up 70 unanswered points dating back to last Thursday, a stretch that has seen the stock rally 24%. We booked profits into this surge on Tuesday. Financials were having a strong day , and Wells Fargo shares rallied more than 3% after getting added to Goldman Sachs' US Conviction List, which is basically a best idea list.

The analysts have a $93 price target on the stock, representing about 8% upside from current levels. Broadcom and Johnson & Johnson are two other portfolio names on Goldman's list. Goldman Sachs is a big believer in the narrative that Wells Fargo is shifting from defense to offense as it grows its balance sheet following the removal of its asset cap.

Financial markets are tracking the development closely as investors assess the likely impact.