Hey Income Traders,

I may sometimes sound like a broken record. But that's because the market is a broken record.

This is a market of durability, both positive and negative. The winners keep winning. The cracks keep cracking. Your job is to figure out which side of that fence you're on, name by name.

So let's do that.

One to Love: The AI Plumbing Nobody Talks About

Coherent (COHR) isn't just an AI stock. It's an AI plumbing stock.

The world keeps obsessing over GPUs. But all those GPUs need to talk to each other at insane speed. That means optics, lasers, transceivers, photonics, and data-center connectivity. In other words, the boring-but-critical infrastructure layer nobody talks about until it breaks.

The latest quarter backs this up. Q3 fiscal 2026 revenue came in at $1.81 billion, up about 21 percent year over year. Non-GAAP EPS hit $1.41 and non-GAAP gross margin came in at 39.6 percent.

More importantly, the Datacenter and Communications segment jumped to about $1.4 billion, up from roughly $1.0 billion a year earlier. That's the AI infrastructure story showing up in actual numbers, not just a PowerPoint deck.

Here's how I think about it. Everyone wants to own the brains of AI. I want to own some of the nerves, arteries, and capillaries. COHR helps move the data.

In the AI inference age, data movement may become just as important as data processing. We may be entering a world of bottlenecks that lead to more than scarcity. Not getting the data you need? You're not processing much.

This fits squarely into the "AI is physical now" thesis. More models, more agents, more inference, more data centers, more interconnects, more photons. Coherent is a "things you can drop on your toe" AI winner. Not software vapor. Real physical infrastructure with real revenue growth behind it.

One caveat worth flagging. It's not cheap anymore. COHR has had a big move, and the current valuation already prices in a lot of AI optimism.

This is a "love the theme, love the setup, respect the chart" name. Not something you blindly chase.

One to Leave: A Great House in a Bad Neighborhood

KKR & Co. (KKR) is a world-class firm. That's not the question.

The question is whether the private-credit worries are actually behind us. I don't think they are.

Here's the core issue. Private credit is now big enough to matter and opaque enough to scare people. Reuters recently reported that regulators have grown more concerned about banks' exposure to the roughly $3.5 trillion private-credit industry. On top of that, wealthy investors have been pulling money from some private-credit vehicles, citing concerns about lending standards and AI disruption to software borrowers.

That last point is worth sitting with. A lot of private-credit loans went out to software companies. If AI is disrupting those software businesses, those borrowers get weaker. And if the loans aren't marked to reflect that, someone eventually has to reckon with it.

Private markets run on confidence, marks, liquidity assumptions, and fundraising momentum. When investors start asking, "Are these loans really marked correctly? Can I get out if I need to? What happens to the software borrowers getting disrupted by AI?" the whole group can trade poorly, regardless of which manager is best in class.

There's an extra data point worth noting. Apollo recently said it plans to offer daily pricing for credit funds. That tells you the market is demanding more transparency. It's not a sign that everything is fine.

None of this means KKR is broken. It may be a great house. But the neighborhood's smoke alarms are starting to go off.

I don't need to short the whole block. I don't need to stand there admiring the drapes either. I'd rather watch this one from across the street until the air clears.

What I'm Watching Into Monday

So one to own. One to watch from a safe distance.

But the bigger question for next week isn't COHR or KKR. It's whether this AI infrastructure trade keeps absorbing every dip while the credit corners keep coughing up smoke. That tension is going to drive a lot of tickers on Monday.

I'll be breaking down the specific names sitting on top of that fault line, and the ones I think pop first when something gives.

And on Monday morning, the team will figure out whether this makes the cut or not.

Join the Ticker Highlight Show Premium before Monday at 10:30 AM ET to find out.

Here for a good time… AND a long time,

Hans