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Defence Holdings (LSE:ALRT) has committed £2 million as a cornerstone investor in a newly established UK Defence Fund designed to back early-stage companies developing technologies for the defence sector.

The independently managed fund will target defence-native technologies spanning artificial intelligence, autonomous systems, cyber capabilities and secure infrastructure. It plans to make minority investments of between £250,000 and £1 million in companies at the pre-seed and seed stages.

Additional funding is expected to come from other professional investors, while the vehicle could also gain access to UK public-backed capital. The structure is intended to give Defence Holdings exposure to a broader portfolio of emerging defence technologies without requiring the company to concentrate investment risk entirely on its own balance sheet.

The fund also extends Defence Holdings’ existing operating model by allowing third-party capital to participate in opportunities sourced through its Meridian programme and other industry relationships. At the same time, the company intends to maintain its primary operational focus on developing its core sovereign software products.

Independent directors approved the investment as a related-party transaction. They concluded that the structure provides Defence Holdings with economic exposure to the expanding UK and allied defence technology markets while limiting its financial obligations.

The company will not be required to make additional capital commitments beyond those necessary to maintain its stake in the fund. The investment comes against a backdrop of rising national defence budgets and growing government interest in technologies capable of strengthening military capability, resilience and technological sovereignty.

Defence Holdings nevertheless continues to face significant financial challenges. Its broader outlook is constrained by a sharp decline in revenue, continuing losses and recurring cash burn. Technical indicators provide little support, with the shares trading below all major moving averages.

Traditional valuation metrics also remain difficult to apply because the company generates negative earnings and does not currently offer a dividend yield.

More about Defence Holdings

Defence Holdings PLC is a UK-listed, software-led defence technology company focused on developing and commercialising sovereign software capabilities for the UK and allied defence markets.

Through government relationships, strategic partnerships and its Meridian Accelerator Programme, the group seeks exposure to emerging defence technologies including artificial intelligence, autonomous systems, cyber resilience and secure information infrastructure.

AstraZeneca (LSE:AZN) has reported positive results from the global Phase III SAFFRON trial, with a combination of Tagrisso and Orpathys delivering significant improvements in both progression-free survival and overall survival for certain patients with MET-driven, EGFR-mutated non-small cell lung cancer.

The study evaluated the all-oral combination against platinum-based chemotherapy in patients whose disease had progressed following treatment with Tagrisso. Results showed that Tagrisso plus Orpathys produced statistically significant survival benefits compared with chemotherapy.

The safety profile observed in the trial was consistent with the established profiles of the two individual medicines, providing further support for the potential use of the combination in this patient population.

The findings strengthen AstraZeneca’s broader strategy of establishing Tagrisso as a backbone treatment across different stages and settings of EGFR-mutated lung cancer. They could also support regulatory submissions around the world for the biomarker-directed Tagrisso and Orpathys regimen.

A successful expansion of the combination would further reinforce AstraZeneca’s position in targeted lung cancer therapies, where identifying specific genetic drivers such as EGFR mutations and MET alterations is increasingly shaping treatment decisions.

From a broader investment perspective, AstraZeneca continues to benefit from strong underlying profitability, a constructive earnings outlook, reiterated guidance and continued momentum across its drug development pipeline. These strengths are partly offset by weaker technical indicators, with the shares trading below major moving averages.

Cash conversion presents a more mixed picture following an increase in net debt during the first half, while the company’s valuation reflects relatively high expectations for future growth rather than presenting an obvious discount.

More about AstraZeneca

AstraZeneca is a global biopharmaceutical company focused on discovering, developing and commercialising prescription medicines across oncology and several other major disease areas.

The company has established a significant presence in lung cancer, particularly in EGFR-mutated non-small cell lung cancer, through targeted treatments including Tagrisso. It is also developing combination therapies with partners such as HUTCHMED as part of efforts to address resistance mechanisms and extend the benefits of precision medicines to additional groups of patients.

The U.S. earnings recovery is becoming much less dependent on megacap stocks, prompting Morgan Stanley to favour quality businesses, artificial intelligence adopters, large-cap financials and consumer discretionary goods. Strategists led by Michael Wilson say the market is also distinguishing more clearly between companies merely delivering higher earnings and those converting that growth into stronger free cash flow.

Earnings momentum spreads beyond megacaps

Second-quarter reporting has produced one of the strongest earnings environments of the current cycle.

Approximately 87% of S&P 500 companies have beaten earnings forecasts, improving from 82% in the previous quarter.

Earnings revision breadth has rebounded to 23%, while 76% of industry groups are experiencing positive revisions.

“The key point is that earnings strength is no longer confined to a narrow group of megacap stocks,” Morgan Stanley’s strategists said.

The broadening suggests investors have a larger universe of companies capable of generating meaningful earnings growth.

Russell 3000 profits accelerate

The improvement is particularly evident across the wider U.S. equity market.

Median Russell 3000 earnings growth has reached 15%, its strongest rate since 2021.

Median revenue growth is approximately 8%, close to its strongest pace since 2023.

Together, these trends suggest the earnings recovery has increasingly solid foundations as revenue growth accompanies improving profitability.

Free cash flow separates winners from losers

The market is becoming more selective as earnings growth spreads.

Morgan Stanley found that the median S&P 500 company receiving positive revisions to both 2026 EPS and free cash flow subsequently outperformed by 1.6% on a relative basis.

Companies receiving positive EPS revisions alongside declining free cash flow forecasts underperformed by 0.2%.

For investors, that difference is significant.

Morgan Stanley said “headline earnings growth alone is becoming less sufficient,” with investors increasingly focused on cash conversion, sustainability and operational quality.

AI adoption becomes a stock-selection factor

Companies successfully incorporating artificial intelligence into their operations remain another preferred group.

Morgan Stanley’s targeted AI-adopter basket continues to outperform the broader market.

The opportunity extends beyond traditional AI infrastructure suppliers.

Businesses capable of using AI to automate processes, increase employee productivity, reduce expenses or improve customer experiences could generate measurable efficiency gains.

That gives investors another way to participate in AI beyond semiconductors and data-centre infrastructure.

Financials remain overweight

Morgan Stanley maintains an overweight position in financials.

Insurance and capital-markets companies are its preferred areas within the sector, supported by improving earnings revisions and favourable signals from the bank’s regime analysis.

A steeper yield curve could reinforce the outlook, although a sharp increase in longer-term yields would introduce additional risks.

Consumer goods positioned for recovery

Consumer discretionary goods also feature among Morgan Stanley’s preferred exposures.

The bank sees household wallet share shifting from services towards goods.

Pricing conditions are improving at the same time that earnings revision breadth is recovering.

Morgan Stanley believes these trends could support a performance catch-up after previous weakness.

Hyperscalers offer better risk-reward than semis

Technology remains important, but Morgan Stanley is selective within the sector.

Semiconductor shares “can continue to participate tactically following the recent momentum unwind.”

Over a longer, multi-month horizon, however, hyperscalers are the preferred exposure.

Morgan Stanley points to their “resilient core businesses, attractive relative valuation and underappreciated optionality around AI-related ROI and adoption.”

That provides hyperscalers with several potential drivers, including core cloud demand, AI adoption and improving returns from infrastructure spending.

Bond yields and oil could challenge the outlook

The main threats to Morgan Stanley’s constructive positioning are higher long-term interest rates and rising oil prices.

Two-year Treasury yields have retreated from their late-July peak, helping produce a steeper yield curve.

A rapid increase at the longer end of the curve would be less supportive.

If inflation expectations or real yields rise sharply, higher long-term borrowing costs “could become a more meaningful risk.”

That could increase companies’ cost of capital and place pressure on equity valuations.

Quality takes priority as earnings breadth improves

Morgan Stanley’s positioning reflects a market in which earnings opportunities are becoming broader but stock selection is becoming more important.

The bank favours companies capable of combining earnings growth with strong cash generation rather than businesses producing headline EPS improvements without corresponding free cash flow.

Its preferred areas are quality stocks, AI adopters, large-cap financials and consumer discretionary goods, while hyperscalers rank ahead of semiconductor companies within technology.

With earnings growth spreading across the Russell 3000 and positive revisions appearing across most industry groups, Morgan Stanley sees a healthier market backdrop—but one where profitability, cash conversion and AI-driven efficiency increasingly separate the winners from the rest.

JPMorgan has become more bullish on the S&P 500 following a powerful second-quarter earnings season, raising its 2026 index target from 7,800 to 8,000. Stronger corporate profits and mounting evidence that hyperscalers are generating commercial returns from their enormous artificial intelligence investments underpin the upgrade, although the bank remains cautious about stretching market valuations further.

JPMorgan upgrades earnings forecasts

Second-quarter earnings have exceeded JPMorgan’s expectations across a wide range of industries.

With 87% of S&P 500 companies having reported, strategists led by Dubravko Lakos-Bujas said performance “remains strong and broad-based across multiple sectors.”

JPMorgan now expects S&P 500 EPS to reach $365 in 2026, compared with the consensus estimate of $358.

That would represent annual growth of approximately 35%.

The bank also raised its 2027 forecast to $420 per share, implying another 15% increase.

Underlying EPS growth remains powerful

Private-company investment gains have provided a notable boost to reported earnings.

Based on valuations recorded during the first six months of 2026, JPMorgan calculates that these gains have added approximately $18 to index-level EPS.

Stripping them out reduces normalised 2026 EPS to around $347.

Even then, annual earnings growth would remain an impressive 28%, suggesting the market’s fundamental strength extends well beyond non-operating valuation gains.

Higher target does not rely on multiple expansion

JPMorgan continues to apply a forward valuation multiple of approximately 20 times earnings.

That is despite describing the environment as “one of the strongest fundamental backdrops since GFC.”

The bank remains reluctant to assume further multiple expansion because interest rates could stay higher for longer, geopolitical uncertainty remains elevated and financial markets must absorb significant amounts of equity and debt issuance.

The path towards 8,000 therefore depends primarily on earnings growth rather than investors paying increasingly expensive multiples.

Hyperscalers begin proving AI returns

AI investment remains one of the most important forces shaping the market.

The focus, however, is shifting.

Rather than simply assessing how much hyperscalers are spending, investors increasingly want evidence that those investments can generate revenue, cash flow and acceptable returns on invested capital.

JPMorgan sees signs that this process is underway.

Google, Amazon and Microsoft stood out during earnings season as “stronger cloud growth, backlog expansion, and improved operating cash flow visibility cleared a high investor expectation bar.”

AI spending could exceed $1.2 trillion

Capital expenditure nevertheless continues to rise at an extraordinary rate.

Consensus estimates suggest AI capex will reach approximately $900 billion by the end of 2026, representing 85% annual growth.

By the end of 2027, spending is projected to exceed $1.2 trillion.

The investment wave is creating enormous demand throughout the AI ecosystem, from semiconductors and servers to data centres, networking infrastructure, power generation and cooling equipment.

Cloud growth provides evidence of monetisation

Cloud results strengthened the argument that hyperscalers are beginning to translate AI investment into revenue.

AWS expanded 37% year over year, Azure grew 43%, and Google Cloud delivered record growth of 82%.

Backlog growth was equally striking.

Google Cloud added $52 billion sequentially, taking its backlog to $514 billion.

AWS backlog increased 36% from the previous quarter to $496 billion, almost 2.5 times the level recorded a year earlier.

Those figures provide considerable visibility into future demand.

AI capex creates a $430 billion cash flow gap

The biggest concern is increasingly cash generation.

Combined trailing-12-month hyperscaler net income has risen to $599 billion, while free cash flow stands at just $169 billion.

That leaves a gap of approximately $430 billion.

At the end of 2023, the two measures were roughly equal, illustrating how dramatically the AI capital-spending cycle has changed cash-flow dynamics.

JPMorgan expects this pressure to persist.

Apart from Microsoft, its analysts forecast that most hyperscalers will generate negative free cash flow through the 2026-2027 period.

Earnings growth drives JPMorgan’s 8,000 target

The combination of strong corporate earnings and improving AI monetisation has given JPMorgan greater confidence in further S&P 500 gains.

The bank’s 2026 EPS estimate now stands at $365, rising to $420 in 2027.

Rather than relying on further valuation expansion, JPMorgan has kept its forward multiple near 20 times, meaning stronger profits are doing most of the work behind the upgraded index forecast.

While enormous AI investment is placing considerable pressure on free cash flow, accelerating cloud revenue and record backlogs provide increasing evidence that this spending is generating demand.

JPMorgan consequently sees the S&P 500 reaching 8,000 in 2026.