Stocks started September on a choppy note, with rising oil prices and rising U.S. Treasury yields testing investor appetite for the market’s biggest artificial intelligence winners. For the week, the S&P 500 rose 0.1% and the Nasdaq rose 0.4%, recovering from a historically tough start to September. This was the fifth weekly increase in the past six weeks for both indexes. Bond yields rose on Friday after the better-than-expected August jobs report, with the two-year Treasury yield hitting its highest level since January 2025. The report added to inflation concerns already heightened by rising oil prices due to renewed hostilities between the United States and Iran. According to the CME FedWatch tool, market odds of the Federal Reserve raising interest rates in September are now 58%, up from 49.4% a day earlier. Here, we take a closer look at three trends that propelled our portfolio last week. We’re balancing our AI exposure Last week, we made some meaningful changes to our portfolio, reducing our exposure to the biggest winners in AI buildouts that have fallen out of favor recently, and adding more defensive names. Even Nvidia’s explosive profits last week failed to spark a broader AI rally, adding to concerns that investors are becoming less willing to reward even the group’s strong performance. On Monday, we drove down Palo Alto Networks’ stock price ahead of Tuesday night’s earnings, locking in roughly a 148% gain on shares purchased in August 2024. The sale was aimed at preserving profits after the stock price rose more than 80% this year. Since the all-time high in mid-August, there has been some upside from this bull market. This move did not change our belief that AI will drive increased cybersecurity spending. We exited Corning on Tuesday, locking in an average profit of 52%. Although still up 70% this year, the stock is down more than 40% since its all-time high in late June. On Wednesday, the company reallocated some of its capital to BNY and Kimberly-Clark, starting with each a roughly 1% weight in the portfolio. BNY adds less cyclical, fee-driven finance. Kimberly-Clark offers a cheaper valuation, 4.75% dividend yield, and is a potential catalyst for the pending Kenvue acquisition. It also added a stake in Micron on Thursday, bringing its position to about 1%. Buoyed by Nvidia’s bullish long-term outlook, our confidence remains high as AI-driven memory demand continues to outstrip supply. Strong results aren’t enough Despite the company’s better-than-expected sales and earnings Wednesday and a bullish long-term outlook for AI, the market remains reluctant to reward Broadcom’s growth. CEO Hock Tan raised his forecast for AI revenue in 2027 to $115 billion, and expects it to double to $230 billion in 2028. Still, concerns about customer concentration, vendor financing and data center rebound continue to weigh on the stock. While maintaining the rating of 2, equivalent to Hold, the company lowered its price target from $480 to $430. Stocks ended the week down 3%. Prior to last week’s earnings release, we sold half of our remaining Broadcom position to reduce the impact of our AI data center build-out. “My only regret is… not getting rid of everything,” Jim Cramer said during a Thursday morning meeting. But for now, Jim said he intends to keep his remaining position because of Broadcom’s growing relationship with Anthropic, an AI startup that plans to go public this fall. Palo Alto Networks also reported strong financial results after Tuesday’s trading. This quarter reinforced our view that AI is a significant tailwind for cybersecurity. After Wednesday’s inventory crash, we’re glad we trimmed it down to print. Following Wednesday’s pullback, the company raised its rating on Palo Alto from a “3” rating to a “2,” equivalent to a hold, and raised its price target from $380 to $400 on Tuesday night. CEO Nikesh Arora said the world’s roughly $1 trillion in cybersecurity infrastructure needs to be modernized to protect against new threats. “If you don’t understand cybersecurity properly, you can’t successfully implement AI,” he told CNBC’s “Mad Money” on Tuesday. Nevertheless, the stock sold on profit-taking, and Palo Alto was the worst-performing stock in the portfolio last week, dropping more than 10%. Nvidia Deepens AI Moat, Again Nvidia’s $12.9 billion acquisition of Hugging Face strengthens the ecosystem around its chips by giving it access to an open source AI platform used by more than 18 million developers. We see similarities with Microsoft’s 2018 acquisition of GitHub. Rather than directly monetizing the platform, Nvidia can deepen developer loyalty, make its own hardware and software a natural choice for deploying AI models, and keep strategic assets out of the hands of competitors. The deal also helps Nvidia hedge against hyperscaler custom chips. Whether developers use open source models or proprietary models, both require large amounts of compute. As long as AI adoption continues to grow, Nvidia stands to benefit. Nvidia is trading at just 14 times next year’s expected earnings, despite earning about 22% this year. Jim said it’s still too cheap considering the company’s growth and expanding AI ecosystem. He said larger share buybacks could provide further stimulus for the stock, which rose 6% last week and is inching closer to returning to record highs set in mid-May. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. 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