📊 Did Oracle Turn AI Excitement Into An Audit?

Oracle’s latest earnings and investment plans have triggered a sharp reassessment of the sustainability of the current AI infrastructure boom. Oracle reported about $16.0-16.1 billion in quarterly revenue, which grew around 14% year on year but came in slightly below expectations. Adjusted earnings per share were $2.26, led by a $2.7 billion one-time gain from selling the company’s stake in Ampere Corporation rather than improved profitability. At the same time, the company invested around $12 billion in capex, increased the company’s AI data center investment plan to $50 billion by 2026, and reported a free cash flow of around -$10 billion, despite a large existing debt load. The stock fell about 14-15% on the news, erasing roughly $70-80 billion in market value and triggering declines in other AI-linked names such as Nvidia, Broadcom, and Meta.

Such a result shows how quickly market attitudes can change when accelerated AI expansion is combined with heavy investing and increasing leverage. Oracle is now positioning itself as a major infrastructure supplier for large AI users, placing the company in a position of a huge order backlog. This latest result also illustrates how investment in this approach, which has been accompanied by a substantial increase in leverage when revenue growth is not significantly ahead of expectations, is necessary. A fine line has now been drawn between exploiting the AI opportunity and maintaining a robust balance sheet, as Oracle and several peers were marked down.

Oracle's performance has set a new standard for how companies that expose their businesses to AI are measured. Previously, companies that showed the most improvement in their finances, even if it was in their backlogs, were touted as leaders. But it seems that in this day and age, timing and quality of funds, as well as return on investment, are being valued most in companies that expose their businesses to AI. This means management teams will have to face the challenge of proving profitability in AI investments.

Fed’s third cut of 2025: The Fed delivered the third 25 bp cut this year, taking the funds rate to 3.50-3.75%, in a split decision, signaling a likely pause next and only one more cut projected for 2026, which keeps real borrowing costs relatively high and limits how much easing markets can price in.

Global market reaction: In the wake of the Fed decision, Treasury yields and the dollar moved lower while global stocks firmed; this slightly eased financial conditions and improved the backdrop for carry trades, higher-beta equities, and bond-like assets.

Jobless claims spike: Initial jobless claims rose by 44,000 to 236,000, with the biggest jumps in California, Illinois, and New York. That could indicate that layoffs are starting to pick up in some big states-a factor that, over time, would eventually restrain consumer spending.

Slow-bleeding inflation: Cleveland Fed nowcasts put November and December Consumer Price Index, and Personal Consumption Expenditures prints around 0.3% month over month, pointing to gradual disinflation and leaving real policy rates still modestly positive even after the latest cut.

Paulson’s risk tilt: The President of the Philadelphia Fed, Anna Paulson, said that she was now more concerned with the softness in the labor markets and the rise in unemployment compared to persistent inflation. This makes her more inclined to favor additional cuts if job data weaken further.

Visa’s stablecoin boost: Shares of Visa rose after an upgrade at Bank of America that framed the payment rails of stablecoins as an opportunity, not a threat, and backed expectations for stronger long-term transaction volumes and less disruption risk to its cash-flow engine.

Petroleum balance sheet: The Organization of the Petroleum Exporting Countries' new data and guidance show oil supply and demand roughly in balance into 2026 with planned output hikes on hold early next year, easing fears of a glut and supporting cash-flow visibility for major producers and high-yield energy borrowers.

UBS capital relief: The UBS shares jumped to a 17-year high after Swiss lawmakers floated softer capital rules that would allow for more Additional Tier 1 (AT1) issuance instead of pure equity. This would help preserve returns on equity and shareholder payouts while still tightening post-Credit Suisse safeguards.

Cannabis rescheduling hopes: Cannabis-related stocks soared after word that President Trump plans to move marijuana into a less restrictive federal schedule, a change that would relax tax and banking restrictions and boost capital access and profitability throughout the industry.

Lululemon leadership reset: The shares of Lululemon jumped about 9-10% after the CEO Calvin McDonald announced his exit and the company hiked the profit guidance, as investors flocked toward a leadership transition at an underperforming brand, betting on better execution and returns for shareholders.

Europe’s three-week run: European equities are set to post a third consecutive week of gains, with banks and cyclicals at the forefront, as markets price in a friendlier Fed path, alongside more Chinese support-boosting earnings leverage for rate-sensitive sectors and export-heavy indices.

Ireland’s inflation signal: Ireland's November Consumer Price Index slowed to 3.2% year on year, underscoring that euro-area inflation is easing but still above 2%, keeping some pressure on the European Central Bank, while shaping real wage and spending dynamics.

SpaceX IPO risk tradeoff: Musk aims to list SpaceX with a value that could reach $1 trillion, and at the same time, invest billions more into Starship and Mars. As a result, new equity holders will be effectively acquiring Starlink services' cash flow streams and accompanying high-risk and long-term gambles without focus on short-term gains.

Small-cap outperformance: The Russell 2000 has remained resilient, up about 2-3% this week toward fresh highs as investors rotate into smaller, more rate-sensitive companies that benefit most from lower borrowing costs and easier refinancing.

Bitcoin volatility watch: Bitcoin is holding in the low-$90,000 range after an early-week pop and post-Fed swings, keeping crypto valuations elevated while leaving listed exchanges and miners exposed to sharp moves that can hit funding costs and balance-sheet marks.

Disney’s AI licensing play: Disney’s $1 billion investment with OpenAI, along with its plan to license hundreds of characters to the Sora video model, points to a new way to monetize its intellectual property. It gives Disney a clearer test of whether AI-assisted creation can drive incremental revenue in streaming and consumer products.

Lilly’s next-generation obesity drug: Eli Lilly shares traded higher after a Phase 3 trial showed its experimental obesity drug, retatrutide, delivered weight loss of close to 30% at the highest dose. It reinforces expectations for a powerful new obesity franchise and stronger long-term earnings growth.

Other interesting reads:

Netflix’s $72 billion power grab: Netflix wants to spend $72 billion to buy Warner Bros Discovery and fold HBO Max into its platform, amassing a combined base of about 428 million subscribers. Antitrust experts say regulators are unlikely to buy Netflix's argument that it requires the deal as a way to remain competitive with YouTube. They say the two services have different content, business models, and competitive markets, and the Justice Department would likely review them separately. (The Brutal Competition)

Alzheimer’s multi-target turn: The fact that Novo Nordisk’s failed trial with semaglutide, combined with some benefit seen with Lilly’s Kisunla and Eisai and Biogen’s Leqembi, seems to be pushing the area more towards fewer single-pathway therapies. Scientists increasingly appear to be discussing cancer cocktail therapies that target multiple things at once, like Amyloid and Tau, and various other biomarkers, after so many failures with therapies with a single target. (The Failed Trial)

Legendary crypto fraud reckoning: Do Kwon, who created TerraUSD, was handed a 15-year prison term in the United States because a court labeled his crypto empire's collapse worth $40 billion as an “epic, generational” fraud. It highlights the tougher stance adopted by the prosecution against people who start a crypto business and deceive, as well as result in massive losses due to that. (The Epic Fraud)

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🟩 Up this week

Goldman Sachs (GS) +5.13% WTD: GS hit an all-time high as the Fed cut steepened curve and boosted expectations for capital markets and trading revenues, making its rate-sensitive earnings more valuable in a world of lower policy rates but still-healthy activity. (The Move)

Newmont (NEM) +9.26% WTD: The gold miner surged over 6% on Thursday as gold futures hit fresh highs after the Fed's rate cut, putting Newmont among the standout gainers in a rally across gold miners. (The Gainers Club)

Boot Barn (BOOT) + 1.17% WTD: Boot Barn popped more than 4% after a strong earnings report and upbeat growth outlook, as traders rewarded the retailer’s ability to keep expanding even in a choppy consumer environment. (The Growth Playbook)

Penumbra (PEN) +3.99% WTD: Medical-device maker Penumbra rallied to a multi-year high, extending a strong run as investors continued to reward its growth story in minimally invasive treatments. (The Treatments)

🟥 Down this week

Broadcom (AVGO) -8.52% WTD: Shares of Broadcom plummeted about 8.4% on Friday after it warned of slimmer margins on sales of its AI systems despite robust revenue guidance amid-heightening concerns over the profitability of massive AI-related spending. Stocks of chip companies took a hit in light of this. (The Slim Margins)

Advanced Micro Devices (AMD) -1.77% WTD: AMD fell about 1% in sympathy as a warning from Broadcom and the outlook from Oracle revived fears of an AI bubble, pressuring the broader semiconductor index. (The AI Concerns)

Super Micro Computer (SMCI) -4.64% WTD: Super Micro fell in Thursday trading as part of the AI hardware pullback, with investors taking profits in some of the most extended AI-server names after Oracle’s heavy-spend message. (The Pullback)

Dell Technologies (DELL) -4.59% WTD: Dell also traded lower as the market reassessed AI hardware plays in light of soaring capex and margin worries flagged by Oracle and Broadcom, putting pressure on servers-and-storage names tied to the AI build-out. (The Hardware Plays)

That’s the wrap for this week’s market movements. We’ll be back next week with more updates on our live portfolio.

Until then, happy investing!
— The Investogy Team, Kätlin & Siimon

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