Right now, investors all over the world are piling into Nasdaq-listed AI infrastructure stocks. Micron and SanDisk are two of the hottest names – they’ve soared in 2026.

Now, these stocks could keep rising; the near-term fundamentals do look strong. However, with many of these names up more than 100% this year, I’m wondering if it might be smarter to focus on some of the AI stocks that have been left for dead?

A cheap Mag 7 stock

One high-quality AI stock that’s suffered recently is Microsoft (NASDAQ: MSFT). This year, it’s actually down despite all the AI hype.

Why’s it fallen? Because it’s a software business and investors don’t want a bar of software right now.

I think there could be an opportunity to consider here while the stock’s under pressure. In my view, it’s far too early to write this company off. Recent earnings were strong. For the quarter ended 31 March, revenue was up 15% year on year at constant currency.

Notably, on the earnings call, the company said that its Copilot service now has 20m paid enterprise seats. This suggests its AI services are gaining traction.

It’s worth pointing out that Microsoft is the second largest cloud computing company in the world (it’s not just a software play). And it’s developing its own AI chips. So while there are risks around software disruption, I continue to see a lot of potential here, especially while the price-to-earnings (P/E) ratio is in the low 20s.

Consistent top-line growth

Another name that’s been lumped into the software basket is AXON Enterprise (NASDAQ: AXON). The maker of Taser guns, it’s a global leader in public safety.

This company – which is using AI heavily today – continues to grow at a rapid rate. For the first quarter of 2026, revenue was up 34% to $807m (its ninth consecutive quarter of 30%+ growth). On the back of this performance, the company raised its full-year guidance.

However, investors weren’t that excited because it’s not an AI infrastructure play.

With the stock down around 50% from its highs, I see an opportunity to consider here (I’ve been buying shares recently). A growth slowdown is a risk given the company’s high P/E ratio (40, using next year’s earnings forecast), however, taking a five-year view, I’m very bullish.

No AI slop here

Finally, Palantir‘s (NASDAQ: PLTR) another AI stock that could be worth checking out. I’ve been buying here too.

Last quarter, this company generated revenue growth of an unbelievable 85% as businesses in the US scrambled to adopt its AI solutions. However, investors didn’t care – because it’s a software company.

Is Anthropic a risk? Potentially. However, if you listen to the Q1 earnings call, the company repeatedly talks about how its Artificial Intelligence Platform (AIP) is superior to standard LLMs.

“AIP is the only platform that establishes a true AI no-slop zone, a necessary requisite to converting potential AI leverage into compounding real-world value without risking enterprise disaster.”

Palantir Chief Revenue Officer Ryan Taylor

Now, this stock’s expensive – the forward-looking P/E ratio using next year’s earnings forecast is 68. However, if the company keeps growing at a prolific rate, it’s only a matter of time until it looks cheap.

So I think it’s worth considering as a growth play.

The post While everyone’s piling into AI infrastructure stocks like Micron and SanDisk, consider these out-of-favour Nasdaq 100 names appeared first on The Twelfth Magpie.

More reading

• Could buying Microsoft stock now be like buying Alphabet in mid-2025 at a share price of $150?
• Should I dump Duolingo from my ISA and buy Palantir stock instead?
• Palantir stock: I’m buying the dip after this week’s blowout Q1 earnings
• Buy the dip on Palantir shares?

Edward Sheldon has positions in Nasdaq, AXON Enterprise, Microsoft, and Palantir. The Motley Fool UK has recommended Axon Enterprise, Microsoft, and Nasdaq. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

While S&P 500 tech stocks Nvidia, AMD, and Micron are flying in 2026, there’s a £7 FTSE 250 stock that’s outperforming all these names. I’m talking about Raspberry Pi (LSE: RPI), which has gained about 140% year to date.

So what’s this stock all about? And should investors consider buying it?

Why’s the stock soaring?

Raspberry Pi designs and develops high-performance, low-cost, single-board computers (SBCs). These are tiny, credit card-sized computers that cost around £50 and don’t have a case or a monitor.

Now, the reason the stock’s soaring right now is that users have worked out that Raspberry Pi’s SBCs can be quite useful for artificial intelligence (AI0 applications. Recently, people have been using them to power OpenClaw virtual assistants.

As a result, the company’s received a lot of publicity on social media. This has boosted sales and earnings – revenue for 2025 was up 25% year on year to $323m while adjusted earnings per share was up 35% to 14.5 cents.

It has also led to significant interest in the stock, with buyers flooding in recently (it has been a little ‘memey’). This has pushed its share price up dramatically.

One other thing worth noting is that in the company’s 2025 results, it said that it saw high demand for its semiconductors last year (its other product line). For the first time, semiconductors sales (8.4m units) eclipsed sales of boards and modules.

So this is no longer just a play on SBCs. It’s also a chip stock (and chip stocks are the hottest area of the market right now).

Is there an opportunity here?

Is the stock worth a look today? Well it could be, if an investor’s seeking exposure to high momentum growth shares.

Personally though, I feel now’s not the best time to be investing in this technology company. Because after its share price surge this year, it now looks very expensive from a valuation perspective.

At present, the forward-looking price-to-earnings (P/E) ratio here is about 80. That earnings multiple doesn’t leave any room at all for a slowdown in growth or an operational setback (such as an increase in supply chain costs).

To my mind, the stock’s overvalued at current levels. I could get my head around a P/E ratio of 30 or maybe even 40, but not 80.

It seems analysts agree that the stock’s overvalued right now. At present, the average analyst price target is £3.90 – that’s about 40% below the current share price.

So while this UK-listed tech company is no doubt exciting (and has plenty of growth potential), I’m not convinced it’s the best investment today given the valuation. If the share price and valuation were to come down though, there may be an opportunity to consider.

The post Meet the £7 FTSE 250 tech stock that’s outperforming Nvidia, AMD and Micron in 2026 appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Edward Sheldon has positions in Nvidia. The Motley Fool UK has recommended Advanced Micro Devices, Nvidia, and Raspberry Pi Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Microsoft‘s (NASDAQ: MSFT) stock has underperformed (in 2026, its share price has fallen more than 10%). Because it’s a software company, investors aren’t interested in it.

Looking at the stock today however, I see similarities to Alphabet (NASDAQ: GOOG) (Google) back in mid-2025 when it was out of favour and trading near $150 (it has since soared to near $400). Here’s why I think Microsoft could be set to surge at some point just like Alphabet has.

Examining Alphabet’s rebound

In mid-2025, a lot of investors were completely writing Alphabet off. The theory was that ChatGPT was going to disrupt Google search and destroy Alphabet’s business model.

Alphabet didn’t sit around doing nothing as people started to use ChatGPT for search. Instead, it used its financial resources and tech expertise to build an AI product equally as good (Gemini), and then integrated it into its ecosystem, winning back market share.

Additionally, it worked on developing its own powerful AI chips, tensor processing units (TPUs). It’s now selling these to other tech companies, meaning that it has a whole new revenue stream.

Ultimately, it was able to adapt to the changing business landscape and continue thriving (its latest earnings showed revenue growth of 19% at constant currency). As a result, its share price has rebounded, soaring to new all-time highs.

Could Microsoft do the same thing?

Now, I reckon Microsoft is capable of a similar turnaround. Today, it’s out of favour because people are expecting its software sales to fall due to AI disruption and automation. This is a risk. But here’s the thing – Microsoft’s finding new ways to generate revenue.

For example, in its recent earnings it told investors that its AI-powered digital assistant service Copilot now has 20m paid enterprise seats. This service costs around £15 a month per user, so that’s a fair bit of revenue.

Meanwhile, like Alphabet, Microsoft’s also developing its own chips. Earlier this year, it announced the launch of Maia 200 – an inference chip designed to improve the economics of AI token generation.

These chips are not being sold to other companies today. But if the company was to sell them to other businesses, there could be a whole new source of revenue.

Ultimately, there are many ways that Microsoft could reinvent itself for the AI era. I expect it to do just that – this is a company with a history of evolution.

The stock’s cheap today

Zooming in on the valuation, Microsoft looks quite cheap. Looking at the earnings forecast for the year starting 1 July, the forward-looking price-to-earnings (P/E) ratio’s only 21. At that multiple, I see the potential for an upward valuation rerating if the company can show that it’s having success in the AI era. In the past, it has often traded on P/E ratios in the 30s.

Of course, there are no guarantees the stock will perform well from here. AI automation is a risk and sentiment towards the stock could remain weak.

At current levels however, I like the risk/reward set-up and believe the stock’s worth considering. It’s worth noting that the average analyst price target is $564 – about 35% above the current share price.

The post Could buying Microsoft stock now be like buying Alphabet in mid-2025 at a share price of $150? appeared first on The Twelfth Magpie.

More reading

• While everyone’s piling into AI infrastructure stocks like Micron and SanDisk, consider these out-of-favour Nasdaq 100 names

Edward Sheldon has positions in Microsoft and Alphabet. The Motley Fool UK has recommended Alphabet and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Legal & General (LSE: LGEN) shares are one of the most popular investments in the UK today. It isn’t hard to see why – they offer a dividend yield of around 9%.

There’s no such thing as a free lunch in the investing world however. And the potential risks here were brought to light in a recent research note by broker Jefferies.

A major downgrade

In this research note (posted on 5 May), analysts Derald Goh and Philip Kett downgraded Legal & General shares to an Underperform rating. They also lowered their price target to 185p (which implies that the company could lose around £3.8bn in market-cap).

The main reason the analysts are bearish on the insurer is to do with its net surplus generation (NSG) – a measure of free cash flow. They believe that in the years ahead dividend payments will consume roughly all of the company’s NSG, leaving no room for balance sheet strengthening, buybacks, or other endeavours.

Given this weak NSG set-up, the analysts believe that the shares will face a valuation reset as investors focus on stronger names in the sector (such as Aviva). Note that their new price target of 185p is about 27% below the current share price.

If this target was to be hit, investors buying the stock at current levels could be underwater for a while. It would take about three years worth of dividends just to break even (assuming that dividends aren’t reduced).

Should investors be worried?

Now, of course, this is just one firm’s view on the stock. Other firms are more optimistic in relation to the outlook for the insurer’s shares. Personally though, I do see a few risks when I look at Legal & General. For a start, the sky-high dividend yield is a bit of a red flag.

This is signalling that large institutional investors are avoiding the stock (if they liked it they would buy it and this would push its yield down). They obviously see something under the bonnet that they don’t like.

Another issue is dividend coverage (the ratio of earnings per share to dividends per share). It’s currently close to one, which suggests that a dividend cut is a real possibility in the years ahead.

There’s also the fact that Legal & General operates in a very competitive industry. And it’s competing against some far more powerful players (eg BlackRock).

Worth the risk?

That said, there are plenty of things to like here. One thing I like is the company’s diversified business model. This isn’t just an insurer. Instead, it’s a broad financial services company that offers solutions in relation to investment management, retirement and insurance.

I also think the valuation’s reasonable (even if Jefferies analysts expect a reset). At present, the forward-looking price-to-earnings (P/E) ratio is only around 10, so it isn’t an expensive stock. Note that if we take next year’s earnings forecast, the P/E ratio falls to 9.5.

I just think that investors need to be careful with this big name, given the risks. The shares could be worth considering, but I would think about keeping position sizes relatively small. After all, if a dividend yield looks too good to be true, it usually is.

The post A £3.8bn warning for Legal & General shareholders appeared first on The Twelfth Magpie.

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• How to invest £150 a month in shares to target a £7,660 passive income for life
• The Legal & General share price is at a 10-year low – but the dividend income is stunning!
• How much do investors need in a SIPP to cover the UK’s £1,377 average rent?
• Here’s how much to put in your ISA if you hope for passive income of £21,000

Edward Sheldon has no positions in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Earlier this year, I initiated a position in Palantir (NASDAQ: PLTR) stock. I got in while it was trading below $130 with the aim of holding for the long term.

Now, since my purchase, the growth stock has risen as high as $162. However, this week, it has fallen back to around $135 on the back of the company’s Q1 earnings report. Given this dip, I’ve been buying more shares for my portfolio.

Superb Q1 results

Palantir’s Q1 results were quite incredible. For the quarter:

• Revenue was $1.63bn, up 85% year on year (its highest ever year-on-year growth rate)
• US commercial revenue was $595m, up 133%
• US government revenue was $687m, up 84%
• Adjusted income from operations was $984m, up 152%

These numbers show that the company is growing both its top and bottom lines at a phenomenal pace (which suggests that demand for its AI solutions is very high). Note that the company’s ‘rule of 40’ score (revenue growth plus operating margin) was 145, which is pretty much unheard of.

Strong guidance

I’ll point out that guidance was also very strong. Looking ahead, the company expects revenue of $7.65bn to $7.66bn for 2026 (versus $4.48bn last year) along with adjusted income from operations of between $4.44bn and $4.45bn (versus $2.25bn for 2025).

These numbers were well above analysts’ forecasts. Note that looking further out, CEO Alex Karp said that he expects US commercial revenue to double in 2027 on the back of demand for the company’s Artificial Intelligence Platform (AIP).

While some within the industry are spending their way to a version or likeness of growth, we have built the platforms that are delivering record and accelerating levels of profit.
Palantir CEO Alex Karp

Why I bought the dip

Overall, the results showed that the AI company continues to grow at a spectacular rate and that demand for its services isn’t slowing down. And that’s why I bought more shares for my portfolio.

In my view, this company is a leader in the AI industry. It offers solutions that add real value for customers and already it’s generating billions in revenue on an annual basis.

I also like management’s confidence. It’s worth noting that on the Q1 earnings call, management stressed that there’s no ‘AI slop’ with its products.

I’ll point out that I expect this stock to be volatile. Because it has a very high valuation (the forward-looking price-to-earnings (P/E) ratio is around 100) and high-multiple stocks tend to be turbulent.

Concerns over competition from other AI companies could also lead to share price volatility. Right now, some investors are worried that Anthropic is going to cut into its lunch.

Taking a five-year view, however, I expect this AI stock to perform well (I think it will grow into its valuation). In my view, it’s worth considering as a high-risk, high-reward growth play.

The post Palantir stock: I’m buying the dip after this week’s blowout Q1 earnings appeared first on The Twelfth Magpie.

More reading

• While everyone’s piling into AI infrastructure stocks like Micron and SanDisk, consider these out-of-favour Nasdaq 100 names
• Should I dump Duolingo from my ISA and buy Palantir stock instead?
• Buy the dip on Palantir shares?

Edward Sheldon has positions in Palantir. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Back in early January, I predicted that FTSE AIM 100 space stock Filtronic (LSE: FTC) would soar in 2026. It’s fair to say that call was on the money – year to date, it’s up about 130% and we’re only in May!

Is the growth stock still worth considering after these high-octane gains? Let’s discuss.

Two new deals announced

From an operational perspective, Filtronic – which specialises in advanced wireless communications solutions – continues to go from strength to strength. Recently, it announced a number of new deals.

For example, on 26 March, it announced an $8m contract with a US company to design, develop, produce, and qualify amplifiers for satellite communications. Shortly after this, on 1 April, it announced that it had been selected by a major European defence prime for the initial phase of a new technology programme and that it had won an initial contract for wide-bandwidth solutions worth £0.4m.

These deals are no doubt encouraging. They signal that the company’s technology is in demand.

The stock is expensive now

Looking at the company from an investment perspective, however, I have a few concerns today. I am no longer as bullish as I was back in January.

One issue for me is that the share price has risen a long way in a very short space of time amid excitement around space stocks (the SpaceX IPO has fuelled this). And as a result, the company’s valuation is now extremely high.

At present, City analysts forecast earnings per share of 3.69p for the year starting 1 June 2026. So, at today’s share price of 404p, we have a price-to-earnings (P/E) ratio of 109.

I was comfortable with a P/E ratio near 50 back in January. But near 110, the risk levels here are very high.

I’ll point out that analysts at Berenberg recently raised their target price to 360p (not far below the current price) so they appear to see the current valuation as justified. Personally though, I see it as overstretched.

Insiders are selling shares

Another issue for me is that directors have recently been selling stock. In April, three different directors offloaded shares.

Now, insiders sell shares for many reasons (eg, buying a house, paying tax, paying for school/university fees). However, when multiple insiders are selling stock simultaneously it can be a bit of a red flag.

It’s worth noting that among those selling were the CFO and the chair. These are top-level insiders and they are likely to have the most information on the company.

Still worth it?

Given the high valuation and the insider selling, I don’t see the stock as one to consider today. To my mind, the risk/reward set-up is not attractive at current levels.

If the stock was to experience a material pullback (to say 240p to 270p), however, it could be worth considering. Because there’s no doubt that the company has long-term growth potential.

The post Up 130% in 2026, can FTSE space stock Filtronic continue to soar? appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Edward Sheldon has no positions in any shares mentioned. The Motley Fool UK has recommended Filtronic Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

S&P 500 tech stock Micron (NASDAQ: MU) is a hot investment at the moment. Believe it or not, over the last week, it’s been the third-most-bought stock on AJ Bell’s platform.

So why are investors scrambling to buy into this tech company? And should those who don’t own any shares consider buying some?

What’s going on with Micron?

Micron’s a memory chip company. And right now, demand for memory is sky high (so much so that there’s a global shortage).

The reason for this is that memory is required to run generative AI models like ChatGPT, Gemini, and Claude. Ultimately, it’s memory that allows these models to learn during training and remember the conversations they have with users.

Now, given the high demand for memory, Micron’s revenues and earnings are surging. In March, for example, the company reported Q2 revenue of $23.86bn versus $8.05bn for the same period a year ago along with non-GAAP earnings of $12.07 per share versus $1.41 a year earlier.

Looking ahead, analysts expect the growth to continue in the near term (they’re scrambling to raise their forecasts). For example, for the financial year ending 31 August, analysts expect revenue of $108.7bn versus $37.4bn last year.

This prolific level of growth is the main reason investors are piling into the stock now. But it’s not the only reason.

A cheap tech stock?

Another is the valuation. At present, Micron stock appears to be very cheap. With analysts expecting earnings per share of $57.50 for this financial year, the price-to-earnings (P/E) ratio’s only 11.1. So we appear to have growth at a reasonable price.

The share price is soaring

One other reason the stock’s grabbing a lot of attention right now is that its share price is flying. Over the last year, it’s risen around 700%. Explosive share price moves like this tend to attract a lot of ‘hot’ money. I’ve no doubt that there are a lot of ‘momentum’ investors in this name at the moment.

Can it keep rising?

Is the stock worth a look today? That’s hard to say. There’s no doubting the near-term fundamentals look very strong. Next financial year, Micron’s revenue and earnings per share are expected to rise 62% and 71% respectively.

The valuation also looks attractive. Taking next financial year’s earnings figure, the P/E ratio is just 6.5.

The problem is, at some stage, memory supply’s likely to catch up with demand. This may well lead to a slowdown in growth and potentially a drop in earnings.

When this happens, the stock could come crashing down given its recent parabolic move higher. Typically, when stocks shoot up as Micron has, they tend to experience sharp falls when conditions change.

So it really comes down to an individual’s view on the memory landscape. If you believe demand for memory will remain high in the years ahead, the stock could be worth considering.

If however, you think that supply will catch up with demand or that demand will moderate, there may be better stocks to look at given that Micron’s up 700% in a year.

The post Why is everyone buying S&P 500 tech stock Micron? appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Edward Sheldon has no positions in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Penny shares are high-risk investments. But they can be worth including in a portfolio due to the fact that they occasionally produce enormous returns.

Here, I’m going to highlight a penny share I currently own in my Stocks and Shares ISA. Year to date, it’s up over 40%, meaning it’s outperformed many more well-known growth stocks such as Rolls-Royce and Nvidia.

Small but mighty

The stock in focus today is Calnex Solutions (LSE: CLX). This is a tiny (market-cap of £57m) Scottish company that specialises in test and measurement solutions for telecoms, cloud computing and data centres, government and defence markets.

It currently trades for 65p. Like most penny shares however, the share price can be very volatile (over the last few years it has been up and down like a yo-yo).

A pickup in performance

As for why the share price is rising at the moment, there are two main reasons, in my view. One is that after a period of operational weakness (due to soft conditions in the telecoms market), business performance is improving.

In an April trading update, the company told investors it had made good progress in the year ended 31 March, delivering double-digit revenue growth and improved profitability, while continuing to invest in its long-term strategy. For the year, revenue was up about 19% to £21.9m (FY25: £18.4m).

Management noted that gross margins had remained strong, which had contributed to an improvement in profitability for the year. It added that at the end of the year, the company had a strong balance sheet with cash of £9.3m on its books.

AI exposure

Another reason is that the company’s expanding into new markets and increasing its total addressable market. Whereas in the past it was mainly focused on telecoms, it’s now generating revenues from the data centre and defence sectors (both of which are high-growth markets).

“Diversification across the cloud computing & data centres and government & defence markets continued to gain traction in FY26 and, against a backdrop of a stable telecoms market, supports confidence in continued growth in FY27 and FY28.”

Calnex CEO Tommy Cook

Zooming in on the data centre market, Calnex recently said that its SNE network emulation product (currently progressing through a successful discovery phase) is attracting keen interest, with anticipated revenue generation in late FY2027. It also said that its Sentry product – which verifies network performance – has seen significant sales to a hyperscaler and that its next generation product offers strong forward potential across the global data centre industry.

An investment opportunity?

Is this penny share worth a closer look today? I think so, especially if it pulls back a little.

In my view, this company has significant long-term growth potential, given its exposure to the 5G, data centre, and defence markets.

Looking beyond the growth potential, I like the fact that founder Tommy Cook is the CEO as founders tend to make strategic business decisions with the long term in mind (note that he owns a lot of shares so it’s in his interest to boost performance).

Now, I need to stress that it’s a high-risk investment. This is a small company and it hasn’t grown in a straight line in recent years.

Taking a three-to-five-year view though, I see a lot of potential.

The post Meet the 65p AI penny share that’s smashing other growth stocks including Rolls-Royce and Nvidia in 2026 appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Edward Sheldon has positions in Calnex Solutions and Nvidia. The Motley Fool UK has recommended Nvidia and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

FTSE 100 stock Unilever (LSE: ULVR) has been a core holding in Terry Smith’s equity fund Fundsmith for a long time. Smith originally invested in the consumer goods company back in late 2010 when his fund launched so he has very much been a long-term investor here.

However, the latest Fundsmith factsheet (for April) shows that Unilever has recently been sold. So, why might Smith have sold it? And should investors consider following the star fund manager and offloading the stock?

A dodgy deal?

In terms of why Smith may have sold the Footsie stock, I see a few potential reasons.

First, we have the recently announced ‘mega-merger’ between McCormick and Unilever’s food business (Knorr, Hellmann’s, etc). This has created some uncertainty.

This deal is quite complex – Unilever shareholders will own 55.1% of the combined entity, while Unilever will get 9.9%, and McCormick shareholders 35%. And there are some concerns around the transaction’s structure, long path to closing (it’s not expected to close until mid-2027), antitrust risks, and integration risks.

It’s worth pointing out that when the deal was announced in late March, Unilever shares fell sharply. The market’s reaction suggests that investors weren’t impressed (note that large-scale M&A in the consumer goods industry generally hasn’t worked well in the recent past).

One other thing worth noting here is that ratings agency S&P Global revised its outlook for Unilever to ‘negative’ upon news of the deal. It cited reduced headroom stemming from lower scale and diversity of operations if the deal closes.

Oil price uncertainty

Another reason could be oil prices. Ultimately, consumer goods companies are quite vulnerable to higher oil prices.

Not only are a lot of Unilever’s home care products (Domestos, OMO, etc) petrochemical-based, but a lot of its packaging is based on petroleum derivatives.

On top of this, there are transportation costs. So, Unilever will need to find ways to manage these increased costs.

A new long-term risk

Taking a longer-term view, one other risk that has emerged is potential economic weakness in India (a key growth market for the company). Amid the rise of powerful new AI tools like Anthropic, parts of India’s workforce are starting to see material job layoffs.

If this trend continues, it could hit middle class spending in India. This could lead to reduced demand for Unilever’s brands.

Time to consider selling?

Is it time to consider getting out of Unilever shares given all these risks? That’s hard to say.

Obviously, the investment case isn’t as clear as it used to be. But there are still things to like here.

For example, we have a company with a whole portfolio of trusted brands that is relatively recession-resistant. We also have a good CEO at the helm in Fernando Fernandez (he’s been at the company since 1988 and was previously CFO).

Additionally, there’s a decent dividend yield on offer at the moment. It’s currently near 4%.

Personally, I think long-term investors should consider holding on to the shares. In the near term, however, other stocks may offer better returns.

The post Fundsmith just offloaded this £96bn market cap blue-chip FTSE 100 stock appeared first on The Twelfth Magpie.

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Edward Sheldon has no positions in any shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Taylor Wimpey (LSE: TW.) shares have experienced some weakness in 2026, falling about 26%. As a result, they currently offer a trailing dividend yield of around 9.6%.

Could they be a good option to consider for an ISA or Self-Invested Personal Pension (SIPP)? Let’s discuss.

Three things to like

At first glance, Taylor Wimpey shares look attractive. For a start, we have the massive yield mentioned above. For 2025, the company paid out 7.62p per share in dividends. So with the share price sitting below 80p, we’re looking at huge dividends.

Second, Britain continues to have a housing crisis. So the long-term story here appears to be favourable. It’s worth noting that according to the National Housing Federation, there are 8.5m people in England who can’t access the housing they need. Taylor Wimpey and the other UK housebuilders could help to fix this.

One other attraction of the stock is that it has fallen a long way. Over the last 18 months or so, it has dipped about 50%. After that kind of fall, there could be scope for a rebound. It’s worth noting that the average analyst price target is 108p (about 35% above the current share price).

What could go wrong?

When we dig deeper however, there are few issues that aren’t ideal. One is costs. Right now, all UK housebuilders are all saying the same thing – their costs are surging (due to energy and commodity prices). This is bad news for profits and dividends.

Zooming in on Taylor Wimpey, it said in late April that it now expects build cost inflation to be in the low to mid-single digits in 2026, up from its previous forecast of low single-digit inflation. As a result, analysts are now questioning its operating profit guidance of £400m for the year.

Worryingly, earnings forecasts are plummeting. Over the last month, the consensus earnings per share forecast for 2026 has fallen by around 10% (meaning the price-to-earnings (P/E) ratio of 12 may not be so reliable).

Another issue is affordability. All of a sudden, it looks like UK interest rates won’t come down much in 2026 (they may actually rise). This is a problem for Taylor Wimpey. Ideally, it needs rates to come down materially so that buyers pile into the housing market.

Finally, there’s the dividend. Not only is it predicted to fall to 6.96p per share this year, but dividend coverage (the ratio of earnings per share to dividends per share) is very low meaning that the payout doesn’t look sustainable.

One other thing to note with the dividend is that the company has an unusual policy. Going forward, it has said that it will return a minimum of 5% of net assets as an annual ordinary dividend, with a further 2.5% of net assets returned either as an ordinary cash dividend or via a share buyback.

Worth a look?

Putting this all together, the shares have their pros and cons. There are things to like, but there are also a lot of risks (share price weakness and dividend cuts).

Personally, I see them as too risky. But they could be worth considering if an investor has a long-term mindset and a high risk tolerance.

The post Down 26% in 2026 and offering a yield of 9.6%, are Taylor Wimpey shares a smart choice for an ISA or SIPP? appeared first on The Twelfth Magpie.

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Edward Sheldon has no positions in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.