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The hard truths about building wealth👇 <video src="https://www.youtube.com/embed/3jwE4MmOQwY" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/Episode 19_68986ff51765227416596.jpg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/3jwE4MmOQwY&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/Episode 19_68986ff51765227416596.jpg&quot;}"></video>U.S. stocks slipped Monday at the close, with major indexes easing ahead of the Federal Reserve’s final policy meeting of 2025 and investors digesting fresh developments in big-tech AI plans and a high-stakes media takeover battle.The Dow Jones Industrial Average fell 215.67 points, or 0.45%, to 47,739.3. The S&amp;P 500 shed 23.89 points, or 0.35%, to 6,846.51, while the Nasdaq Composite edged down 32.22 points, or 0.14%, to 23,545.9. The small-cap Russell 2000 finished essentially flat, up 0.13 point, or 0.05%, at 250.90. The CBOE Volatility Index climbed to 16.94, a 9.94% jump on the day, underscoring choppier trading into the meeting.In commodities and digital assets, front-month U.S. crude for January settled at $58.81, down 2.11%, while February gold futures slipped 0.45% to $4,223.80. Bitcoin traded at $90,666.23, off 0.90%, adding to the cautious tone across risk assets.Deal drama added another thread to Monday’s narrative. Paramount Skydance Corp. <a href="https://www.cnbc.com/2025/12/08/paramount-wbd-netflix-hostile-bid-what-to-expect.html" target='__blank'>unveiled a hostile</a> $30-per-share cash bid for Warner Bros. Discovery Inc., valuing the company at $108.4 billion including debt and topping Netflix’s $27.75 cash-and-stock proposal focused only on select assets. Warner Bros. said it would “carefully review and consider” the new offer and expects to advise shareholders on the board’s recommendation within ten business days. “We’re really here to finish what we started,” Paramount Skydance CEO David Ellison told CNBC, adding, “We’re sitting on Wall Street, where cash is still king. We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix,” and arguing that “Allowing the No. 1 streaming service to combine with the No. 3 streaming service is anticompetitive.”The Fed’s two-day gathering, which <a href="https://www.ainvest.com/news/hawkish-cut-january-shock-fed-meeting-markets-edge-succession-drama-looms-2512/" target='__blank'>begins Tuesday,</a> is widely expected to produce a third straight 25-basis-point rate cut on Wednesday at 2 p.m. ET, bringing the federal funds rate to 3.50%–3.75%, according to an analysis from AINVEST. Futures markets place the odds of a move in the high-80% to 90% range, but pricing for 2026 remains cloudy, with the CME curve implying only one to three cuts next year.The bigger question for traders is whether Chair Jerome Powell delivers what strategists are calling a “hawkish cut,” a reduction now accompanied by guidance that signals a lengthy pause. September’s Summary of Economic Projections mapped out a gentle glide path: three cuts in 2025, then just one each in 2026 and 2027, alongside 2026 forecasts for 1.8% real GDP growth, 4.4% unemployment and 2.6% inflation, with the funds rate at 3.4%.Complicating that outlook is a “data fog,” as an extended government shutdown has delayed key labor releases even as private indicators hint at cooling in small businesses and cyclical sectors and consumer confidence has slumped. The Fed itself recently ended quantitative tightening as of December 1, even while judging that inflation remains “somewhat elevated.”Amid the macro uncertainty, Apple remained a focal point for growth investors. Wedbush Securities lifted its Apple price target to $350 from $320, reiterating an Outperform rating and arguing that 2026 will be the year the company “actually enters the AI Revolution,” supported by solid iPhone 17 demand into year-end, including in China. The firm highlighted Apple’s recent AI shake-up, John Giannandrea stepping down as AI chief and Amar Subramanya, a veteran of Microsoft and Google’s DeepMind, joining as VP of AI under Craig Federighi—and estimated that AI monetization could add $75 to $100 per share over time.<visualization data='{&quot;components&quot;:[{&quot;show_type&quot;:&quot;jgyKline3&quot;,&quot;config&quot;:{&quot;codeName&quot;:&quot;name&quot;,&quot;marketTag&quot;:&quot;NASDAQ&quot;,&quot;variety&quot;:&quot;Stock&quot;,&quot;showBottom&quot;:true},&quot;title_config&quot;:{&quot;config&quot;:{&quot;display&quot;:true},&quot;data&quot;:{&quot;h1&quot;:&quot;Apple Inc. (AAPL)&quot;}},&quot;data&quot;:{&quot;datas&quot;:[{&quot;code&quot;:&quot;AAPL&quot;,&quot;name&quot;:&quot;Apple Inc.&quot;,&quot;market_code&quot;:&quot;185&quot;}]},&quot;uuid&quot;:&quot;42b6d646991fa403&quot;}],&quot;page&quot;:{&quot;layout&quot;:{&quot;layout_data&quot;:&quot;[{\&quot;showType\&quot;:\&quot;jgyKline3\&quot;,\&quot;uuid\&quot;:\&quot;42b6d646991fa403\&quot;}]&quot;},&quot;render_for&quot;:&quot;aigc&quot;,&quot;tracking_info&quot;:{}}}' dataurl='undefined'></visualization>With equities modestly lower, volatility higher and central-bank and corporate storylines competing for attention, investors head into Tuesday’s session focused squarely on how much more easing Powell can credibly signal and how soon a new Fed leadership might rewrite that script.

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Wall Street Braces for Fed Rate Cut as Volatility Jumps and AI Mega-Cap Trade Takes Center Stage

The stock market's fascination with corporate splits has resurfaced in 2025 as investors speculate on whether Microsoft, Meta, and ASML-the titans of artificial intelligence (AI), cloud computing, and semiconductor manufacturing-will follow the trend set by peers like Nvidia and Amazon. A stock split, while not altering a company's intrinsic value, can reshape investor psychology and market accessibility. For these three firms, the calculus of share price, retail participation, and growth narratives makes them prime candidates for splits in 2026. <h3>Microsoft: A Long-Overdue Reset for AI's Poster Child</h3>Microsoft's stock price of $490 as of late 2025 <a href="https://finance.yahoo.com/news/prediction-first-tech-company-split-055000770.html">has become a barrier</a> to retail participation, despite the company's dominance in AI and cloud computing. The last split occurred in 2003, and analysts now speculate a 5-for-1 split could bring the share price down to $98, <a href="https://finance.yahoo.com/news/prediction-first-tech-company-split-055000770.html">aligning with the pattern</a> of recent AI-era splits. This move would democratize ownership, particularly for younger investors, while signaling confidence in Microsoft's trajectory. Morgan Stanley's recent upgrade of Microsoft to a "Top Pick" underscores its growth potential, <a href="https://www.investing.com/news/stock-market-news/5-big-analyst-ai-moves-buy-microsoft-on-pullback-meta-cut-on-huge-ai-spending-4324514">with Azure revenue surging 39%</a> and operating margins expanding. However, the stock has underperformed the Nasdaq index during the AI boom, <a href="https://finance.yahoo.com/news/prediction-first-tech-company-split-055000770.html">suggesting a split could rekindle</a> retail enthusiasm and institutional interest. <h3>Meta: Balancing AI Ambition with Investor Skepticism</h3>Meta's aggressive investments in AI infrastructure, including superintelligence, have fueled volatility and skepticism. While ad revenue growth remains robust, <a href="https://www.klickanalytics.com/data_news_article?id_news=46d9ce87-87d3-494a-9e59-5141d63c7e9c">Oppenheimer's downgrade to "Perform"</a> highlights concerns about capital expenditures and ROI on AI bets. A stock split could address Meta's elevated share price, which has limited retail participation despite its pivotal role in the AI ecosystem. By reducing the cost per share, Meta could attract a broader investor base, countering narratives of overvaluation. The company's recent <a href="https://am.gs.com/en-us/advisors/insights/article/learnings-from-earnings">combined capex of $430 billion</a> with peers like Microsoft and Amazon signals a commitment to growth, but a split would need to align with clearer ROI metrics to restore investor confidence. <h3>ASML: A $1,000+ Share Price and the Lithography Giant's Dilemma</h3>ASML's stock, trading above $1,000, has <a href="https://finance.yahoo.com/news/asml-stock-rises-48-6-051123674.html">surged 48.6% in 2025</a>, driven by its leadership in advanced lithography. Yet, this valuation has sparked debates about overpayment. <a href="https://finance.yahoo.com/news/asml-stock-rises-48-6-051123674.html">DCF analyses suggest the stock</a> is overvalued by 37.1% to 42.2%, while its 37.2x PE ratio remains contentious. A stock split would lower the share price, potentially broadening retail appeal and mitigating concerns about accessibility. Despite no announced plans since its 2007 split <a href="https://finance.yahoo.com/news/stock-split-watch-asml-next-131500225.html">no announced plans since its 2007 split</a>, ASML's market capitalization and growth in semiconductor demand make it a logical candidate for a 2026 split. Retail investor sentiment is mixed, with bullish estimates pegging a fair value at €1,000 and bearish ones at €865 <a href="https://simplywall.st/stocks/nl/semiconductors/ams-asml/asml-holding-shares/news/is-asml-still-attractive-after-its-2025-rally-and-conflictin">reflecting the tension</a> between geopolitical risks and technological optimism. <h3>Investor Psychology and Market Accessibility: The Split Equation</h3>Retail participation in the U.S. stock market hit <a href="https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/8/retail-investors-boost-us-equity-buying-institutions-slow-stock-selling-in-july-91965131">a record of $10.08 billion</a> in July 2025, with Microsoft among the most widely held stocks by individual investors <a href="https://finance.yahoo.com/news/microsoft-corporation-msft-among-retail-174823827.html">according to data</a>. High share prices, while a symbol of success, can deter new investors, particularly in high-growth sectors where affordability is key. For Microsoft, a 5-for-1 split would mirror the strategies of Nvidia and Amazon, <a href="https://finance.yahoo.com/news/prediction-first-tech-company-split-055000770.html">which used splits to maintain</a> retail engagement during valuation surges. Similarly, ASML's $1,000+ price tag <a href="https://finance.yahoo.com/news/asml-stock-rises-48-6-051123674.html">risks alienating smaller investors</a>, even as institutional demand remains strong. A split would not only enhance liquidity but also serve as a psychological reset, reinforcing the perception of value in a market wary of overvaluation. <img src="https://cdn.ainvest.com/aigc/hxcmp/images/compress-qwen_generated_1765238780590.jpg.png" style="max-width:100%;"/><h3>Conclusion: 2026 as the Year of the Split</h3>The convergence of AI-driven growth, retail investor dynamics, and valuation pressures positions Microsoft, Meta, and ASML as the most likely candidates for 2026 splits. For Microsoft, a split could reinvigorate its market position after two decades without one. Meta's split would need to address sustainability concerns, while ASML's move would balance its semiconductor dominance with accessibility. As the Nasdaq's AI-era darlings, these companies' decisions will shape investor psychology and market accessibility in the coming year.<visualization dataurl="https://cdn.ainvest.com/news/visual/visual_components/viz_oz76pme8.json"></visualization>

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Why Microsoft, Meta, and ASML Are the Top 2026 Stock Split Contenders

<video src="https://www.youtube.com/embed/yUiJbRIdsus" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/HatfieldFedImage_41a8902e1765223139128.jpeg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/yUiJbRIdsus&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/HatfieldFedImage_41a8902e1765223139128.jpeg&quot;}"></video>The Federal Reserve’s final meeting of 2025 looks less like a routine year-end check-in and more like a stress test of its “data-dependent” mantra in a world short on data and long on politics. Policymakers convene Tuesday and are <a href="https://finance.yahoo.com/news/live/federal-reserve-live-coverage-fed-set-to-cut-interest-rates-for-third-time-this-year-2026-forecast-in-focus-180343716.html" target='__blank'>widely expected</a> to deliver a third consecutive 25 bp rate cut on Wednesday at 2 p.m. ET, taking the funds rate to 3.50–3.75%. The real question for markets isn’t what happens this week, but what—if anything—Chair Jerome Powell is willing, and still able, to signal about 2026. <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target='__blank'>Futures markets</a> put the odds of a cut in the high-80s to 90% range, but pricing beyond December is murky. The CME curve shows only about a 25% chance of another move in January and then a fuzzy cluster of expectations for one to three cuts in 2026. The consensus on the Street is for a “hawkish cut”: the Fed trims rates this week, then effectively tells markets to get comfortable with a long pause. Goldman Sachs is one of the notable outliers, arguing Powell could surprise by keeping the door open to a January move—an upside risk for equities in a market braced for a tough-talking Fed.The updated <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20250917a.htm" target='__blank'>Summary of Economic Projections (SEP)</a> and <a href="https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20250917.htm" target='__blank'>dot plot</a> will be the first place investors look for that signal. In September, the median projections mapped out a very gentle glide path: three cuts in 2025 followed by just one more in 2026 and another in 2027. For 2026, the Fed saw real GDP at 1.8%, unemployment at 4.4%, headline and core PCE at 2.6%, and the funds rate at 3.4%. By 2027, growth nudged up to 1.9%, unemployment dipped to 4.3%, inflation fell back to roughly 2.1%, and the policy rate only drifted down to 3.1%. In other words: disinflation in progress in 2026, inflation effectively back at target in 2027, yet rates still structurally higher than the pre-COVID era.Dot Plot:<img data-json="{&quot;id&quot;:&quot;a3fed08c-052f-4cdf-af7b-d0e2bcdc954d&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/69fa695b-e2bf-4170-b5b0-afdc9e096802_image_09b175281765223330362.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/69fa695b-e2bf-4170-b5b0-afdc9e096802_image_09b175281765223330362.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />The September dot distribution told the same story. Most officials clustered between roughly 3.50–3.75% for 2025, sliding to the low-3s in 2026–27 and converging around a longer-run “neutral” rate near 2.5–2.75%. Cuts were coming, but this was slow normalization, not a sprint back to zero. On Wednesday, markets will be watching for three things: whether the 2026 and 2027 medians inch lower (signaling a bit more comfort with easing), whether the unemployment path is revised up to reflect a softer labor market, and whether any officials push the longer-run neutral rate higher again—a hawkish tell.Complicating all of this is the Fed’s own admission that it’s flying through some data fog. The extended government shutdown has delayed key labor reports, robbing officials of an updated unemployment rate at precisely the moment when the jobs narrative is most contested. Private data like ADP are flashing weakness in small businesses and cyclical sectors, while initial claims remain surprisingly low. Consumer confidence has slumped to levels more consistent with recession than soft landing. It is not an ideal backdrop for “data-dependent” forward guidance, and markets know it.That’s why the evolution of the statement language will carry so much weight. In the most recent statement, the Fed described economic activity as expanding at a “moderate pace,” noted that job gains had slowed and unemployment had edged up but remained low, and conceded that inflation had “moved up” earlier in the year and was still “somewhat elevated.” Crucially, the Committee judged that downside risks to employment had risen and cited this shift in the balance of risks as justification for its 25 bp cut to 3.75–4.00%. At the same time, it announced plans to end balance-sheet runoff on December 1, formally concluding quantitative tightening.September Summary if Economic Projections: <img data-json="{&quot;id&quot;:&quot;287c8150-4d45-490c-809b-fb77bb7dd42f&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/2e0183a6-c725-4991-bd94-d647386aa7ca_image_8063bf8e1765223548485.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/2e0183a6-c725-4991-bd94-d647386aa7ca_image_8063bf8e1765223548485.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />On Wednesday, small tweaks to those sentences will be the tells. Any upgrade of growth language, or softer reference to employment risks, would skew hawkish. Acknowledgment that inflation pressures are easing again, or a stronger emphasis on labor-market deterioration, would nudge the message in the other direction. Markets will also want clarity on the stance of the balance sheet now that QT is over—does the Fed see its current holdings as roughly stable, or is a distant discussion of reinvestment and eventual balance-sheet expansion back on the table?Layered on top of the macro debate is a Fed that is more openly divided than at any point in Powell’s tenure. At the last meeting, Stephen Miran dissented in favor of a larger 50 bp cut, while Kansas City Fed President Jeffrey Schmid preferred no cut at all. That two-sided dissent underscored the Committee’s split between a dovish camp focused on labor-market risk, a hawkish camp worried about sticky inflation and financial stability, and a shrinking center trying to move in 25 bp increments. This week, with several regional presidents openly questioning the need for another cut, the dissent count could rise further. Three or more “no” votes—or another push for a larger cut from Miran—would signal a Fed that is losing its internal consensus just as Powell’s term winds down.And this is where the politics intrude. Powell is increasingly viewed as a lame-duck chair, with markets already gaming out a potential transition to a Trump-appointed successor. Kevin Hassett is widely seen as a leading candidate, and while it’s unlikely, there has even been speculation that Trump could try to upstage the press conference by announcing Powell’s replacement while the chair is still at the podium. That headline probably never hits—but the fact that traders even discuss the scenario tells you how much the succession risk is in the air.CME Fed Fund Futures- December 2026 Outlook:<img data-json="{&quot;id&quot;:&quot;f773b266-8823-48ca-9c2f-d24b0cf873bc&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/260332be-9386-44fb-9fdf-431588312219_image_fad5131a1765223643758.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/260332be-9386-44fb-9fdf-431588312219_image_fad5131a1765223643758.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Hassett’s perceived fingerprints on the recent steepening of the curve only heighten the stakes. Some in the market blame his policy proposals and rhetoric for pushing up term premia and helping drive long-end yields higher. That makes this meeting doubly sensitive: Powell is trying to guide expectations for the 2026 path at the same time investors are starting to discount the possibility that a more dovish, politically aligned chair could be steering the Committee before those projections ever play out. If markets conclude that the incoming regime will lean harder on cuts and tolerate higher inflation, long yields may stay elevated even as the Fed trims at the front end—exactly the opposite of what a textbook easing cycle is supposed to deliver.For markets, the combination—a likely cut, a dot plot still pointing to a very gradual path, a fractured Committee, and a chair whose influence may be fading—tilts expectations toward a hawkish outcome. The base case is a “last good cut” message: rates come down 25 bp, but the statement and SEP imply a long pause, with any future reductions tightly conditioned on clearer evidence of weak growth or disinflation. That would support the dollar, pressure long yields, and keep equities choppy into year-end.The upside surprise, oddly, is that Powell sounds less hawkish than feared and leans into the rising risks to employment, the data gaps, and the possibility of another move as soon as January. In a year where every twist in Fed communication has whipsawed risk assets, traders will be listening less to the 25 bp move itself and more to whether Wednesday feels like the end of Powell’s easing cycle—or just the last chapter before someone else starts writing the script.<video src="https://www.youtube.com/embed/3jwE4MmOQwY" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode 19_87a972871765223104282.jpg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/3jwE4MmOQwY&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode 19_87a972871765223104282.jpg&quot;}"></video>

Policy Meeting Outcomes

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Hawkish Cut or January Shock? Fed Meeting Has Markets on Edge as Succession Drama Looms

<video src="https://www.youtube.com/embed/28HA0ZGiQW8" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/ORCLZinPreview_e17c4c411765217710185.jpeg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/28HA0ZGiQW8&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/ORCLZinPreview_e17c4c411765217710185.jpeg&quot;}"></video>Oracle’s earnings on Wednesday aren’t just another AI print; they’re basically a referendum on whether a $500 billion capex dream, a $455 billion backlog, and a $100 billion debt stack can peacefully coexist on one balance sheet without giving fixed-income desks a nervous breakdown. <a href="https://finance.yahoo.com/news/countdown-oracle-orcl-q2-earnings-141503290.html" target='__blank'>Analysts expect</a> the headline numbers to look solid. Street models generally line up with management’s guidance for mid-teens revenue growth and another strong quarter of cloud momentum, with total revenue for fiscal Q2 expected to grow roughly 14–16% year-on-year and cloud revenue up in the low-to-mid 30% range. Non-GAAP EPS is expected to land around management’s guide of roughly $1.61–$1.65, with at least one large broker (Jefferies) modeling EPS slightly ahead of consensus. The problem, as CFRA’s Angelo Zino points out, is that “I don’t really think the numbers really matter here this quarter” – the stock will trade on the story around debt, backlog quality, and OpenAI exposure, not a penny or two of EPS.That story starts with the backlog. Oracle’s remaining performance obligations (RPO) exploded to $455 billion in Q1 FY26, up 359% year-on-year and more than tripling in a single quarter, with management signaling that RPO should “exceed $0.5 trillion” as additional mega-deals are signed. A huge chunk of that – around $300 billion – is tied to OpenAI’s multi-year compute commitments. As Zino notes, that implies a “hockey stick type of inflection” that really kicks in beyond FY27, with OpenAI’s ramp meant to drive a 9x increase in OCI run rate by decade-end. In the near term, there is “no concern about the demand trajectory,” but the market is increasingly skeptical that those long-dated commitments will be fully monetized, especially if Gemini’s recent momentum eats into OpenAI’s share.That skepticism is amplified by Oracle’s balance sheet. As of Q1 FY26, Oracle had about $10.4 billion in cash and equivalents and roughly $24.6 billion in total current assets. On the liability side, it carried around $91 billion of notes payable and other borrowings (current plus non-current), total liabilities north of $155 billion, and equity of roughly $24.7 billion – implying net debt of roughly $100 billion and a net debt-to-equity ratio just over 4x.(<a href="https://investor.oracle.com/investor-news/news-details/2025/Oracle-Announces-Fiscal-Year-2026-First-Quarter-Financial-Results/default.aspx" target='__blank'>Oracle Investor Relations</a>) Operating cash flow over the trailing four quarters was about $21.5 billion, but capex has exploded: trailing 12-month capex is running roughly $27.4 billion, leaving trailing free cash flow at about negative $5.9 billion.(<a href="https://investor.oracle.com/investor-news/news-details/2025/Oracle-Announces-Fiscal-Year-2026-First-Quarter-Financial-Results/default.aspx" target='__blank'>Oracle Investor Relations</a>) In plain English: Oracle is deliberately running negative free cash flow to build GPU-rich data centers at unprecedented scale, betting that contracted AI revenue will eventually bail out the balance sheet.Recent financing moves underline that bet. Oracle sold roughly $18 billion of bonds earlier this year, including $3.5 billion of 30-year paper that has since dropped about 8% from its peak as tech credit spreads widened. Project-level financing is also swelling: banks have lined up roughly $38 billion of secured loans to build Oracle-tied AI data centers in Texas and Wisconsin via Vantage Data Centers – the plumbing behind the much-discussed “Stargate” build-out for OpenAI capacity. BNP Paribas estimates Oracle will need “only” an additional $25–30 billion of debt on top of that $18 billion issuance to fund the current build plan, far below the $100 billion-plus worst-case fears swirling in the equity market, but still enough to keep credit desks nervous.You can see that nervousness in CDS. Oracle’s 5-year credit default swaps have roughly doubled in recent months from about 40–55 bps to the 100–110 bps area, implying a risk-neutral five-year default probability in the high-single digits – elevated for Big Tech, but still consistent with investment-grade ratings. Zino’s take is that CDS has become “a macro instrument as a hedge against an AI crash,” rather than a direct signal that Oracle is about to blow through its covenants. But he also expects free cash flow to remain negative for “the next two to three fiscal years,” with annual net outflows of $10–15 billion as capex heads toward $80–90 billion by the late 2020s.That’s why this call is really about narrative management. Zino frames the key ask from investors very simply: can management credibly say, “We’ve raised X amount of debt, we generate Y from operations, and for the next 18–24 months we don’t need to tap the capital markets again”? In his view, that alone could be enough to stabilize sentiment and trigger a relief rally in a stock that’s down roughly a third from its September peak and trading at Microsoft-like multiples despite negative free cash flow and much higher leverage. The flip side is ugly: if Oracle can’t define a clear funding roadmap – including how much will come from vendor financing and capital leases versus straight debt – CDS could widen further and the equity multiple compress again.Investors will also be laser-focused on concentration risk. If the “worst-case scenario” for OpenAI plays out – Gemini cements a durable lead, OpenAI’s revenue trajectory falls well short of the trillion-dollar spend narrative, and some contracted capacity goes unused – Oracle has to prove it can backfill those data centers with other hyperscale and enterprise demand. The company has already talked up large deals with Meta, xAI, and other AI labs, but Zino warns that the Street’s long-term EPS targets “bake in” a very robust OpenAI outcome. Any suggestion that Oracle’s $300 billion OpenAI contribution to RPO is less firm or slower to monetize than implied would hit both the backlog story and the credit story simultaneously.Against that backdrop, here’s what matters most on Wednesday:<ul><li>Bookings and RPO: Not just the headline RPO figure, but the breakdown of how much is tied to OpenAI vs. other AI labs and enterprise customers, and how much is truly “contractually firm” versus contingent on deployment milestones.</li><li>Capex and financing: Updated capex guidance beyond the current ~$35 billion fiscal-year plan, details on the mix of vendor financing, leases, and debt, and any commitment not to re-enter the bond market for a defined period.</li><li>Free cash flow path: A clearer bridge from today’s negative free cash flow to positive territory, including timing, margin assumptions on AI infrastructure, and how quickly new capacity becomes gross-margin and cash-flow accretive.</li><li>Credit and ratings: Management’s stance on preserving investment-grade status, and whether they explicitly address CDS widening and recent downgrades/dovish comments from credit analysts.</li><li>AI demand and competitive positioning: Evidence that AI infrastructure demand remains “insatiable” beyond OpenAI – including Meta, xAI, and other labs – and that Oracle’s differentiated network and database stack can sustain premium economics rather than devolving into a commodity GPU-hosting business.
</li></ul>If Oracle can deliver a quarter that pairs solid numbers with a credible funding and risk-management roadmap, this could mark the point where the stock stops trading as a pure “OpenAI leverage short” and starts trading again as a long-duration AI infrastructure play. If the narrative wobbles, the market may decide that when someone says they’ve “sold 4 million homes to buyers with no income,” it’s time to ask a few more questions before funding the next subdivision.<video src="https://www.youtube.com/embed/3jwE4MmOQwY" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode 19_c1774ce41765218810283.jpg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/3jwE4MmOQwY&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/CandPEpisode 19_c1774ce41765218810283.jpg&quot;}"></video>

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Oracle’s $500 Billion AI Bet vs. $100 Billion Debt Pile: Earnings Could Make or Break This “Backlog Bubble”

The hard truths about building wealth👇<video src="https://www.youtube.com/embed/3jwE4MmOQwY" poster="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/Episode 19_310bd6ca1765202813811.jpg" data="{&quot;videoUrl&quot;:&quot;https://www.youtube.com/embed/3jwE4MmOQwY&quot;,&quot;coverUrl&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/Episode 19_310bd6ca1765202813811.jpg&quot;}"></video>Stocks opened to a mixed tone Monday, with the Dow Jones Industrial Average off 36.51 points, or 0.08%, at 47,918.5, while the Nasdaq Composite gained 72.02 points, or 0.31%, to 23,650.2 and the S&amp;P 500 edged up 6.55 points, or 0.10%, to 6,876.95; small caps outperformed, lifting the Russell 2000 1.80 points, or 0.72%, to 252.57. In commodities, U.S. crude oil for January delivery slipped to $59.20, down $0.88, or 1.46%, and February gold futures eased to $4,232.00, off $11.00, or 0.26%. The risk backdrop was more cautious, with the CBOE Volatility Index up 0.86 points, or 5.58%, to 16.27, even as bitcoin climbed to $91,514.13, a gain of $2,548.00, or 2.86%.IBM’s latest move in the AI arms race is <a href="https://www.ainvest.com/news/confluent-soars-ibm-slips-11b-ai-deal-traders-edge-2512/" target='__blank'>an all-cash deal</a> valued at about $11 billion to acquire <a href="https://www.confluent.io/" target='__blank'>Confluent</a>, a real-time data-streaming specialist that sits in the plumbing of modern AI and cloud architectures. Under a definitive agreement, IBM will pay $31 per share in cash for all outstanding Confluent stock, implying roughly a 34% premium to Friday’s $23.14 close and valuing the company at an $11 billion enterprise value. Confluent shares were surging close to 30% in premarket trading, while IBM was down about 1% to 2% as investors weighed the price tag, integration risk and capital-allocation trade-offs.Confluent was founded around Apache Kafka, the open-source standard for “data in motion” that lets enterprises stream, route and process events in real time across applications, clouds and data stores. On top of Kafka, the company has built a full data-streaming platform, cloud and self-managed offerings, governance, stream processing, connectors and newer capabilities like Streaming Agents, to keep data clean and policy-compliant as it flows through increasingly complex hybrid environments. For generative and so-called agentic AI, where software agents are constantly querying and acting, that kind of governed, real-time data fabric is effectively the system’s circulatory network.At the same time, Wall Street is digesting a different kind of AI story: who stands to lose. An equity-strategy report from Wedbush Securities titled “AI Losers: Tech-tonic Shifts Threaten the Status Quo” identifies companies with the highest probability of being left behind in the next phase of AI transformation and coincides with downgrades of Pinterest and Nice from Outperform to Neutral. Wedbush highlights a looming “Memory Squeeze,” arguing that concentrated DRAM and NAND supply and soaring AI infrastructure demand will push DRAM contract prices 30%-plus higher in the fourth quarter of 2025 and lift NAND prices by at least 20%, with further increases expected as hyperscalers lock up capacity. With memory roughly 20% of a PC’s bill of materials, Wedbush estimates that a 27.5% average memory price increase translates into around 5.5 percentage points of added cost of goods sold and 300 to 440 basis points of gross-margin pressure for device makers such as HP Inc. that can’t easily raise prices.<img data-json="{&quot;type&quot;:&quot;image&quot;,&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/uber_e3f4378c1765203941334.jpeg&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}]}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/uber_e3f4378c1765203941334.jpeg" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Wedbush also flags autonomous vehicles as a threat to the ride-sharing model, noting that “full self-driving vehicles built on AI are upon us, with thousands on the road in China and the first Tesla AVs without safety drivers launching in Austin, TX by year end,” and concluding that “this fundamentally weakens the asset-light rideshare model of UBER and LYFT.” In digital advertising, the firm writes that “Agentic AI represents the next phase of digital advertising—where autonomous AI agents make decisions, execute tasks, and optimize spending without manual human intervention,” a shift it says will tilt budgets toward platforms with rich first-party data and measurable conversions and away from discovery-oriented or open-web ad players such as Pinterest and The Trade Desk.Beyond the headline AI trade, some strategists are warning about weaker foundations elsewhere in the market. Torsten Slok, chief economist at Apollo Global Management, recently highlighted that 40% of companies in the Russell 2000 Index have no earnings, according to a chart in Apollo’s “Daily Spark,” using Bloomberg data, underscoring the quality gap between big, profitable benchmarks and more speculative small caps.<img data-json="{&quot;type&quot;:&quot;image&quot;,&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/120825_Chart_bce51bb21765204045996.jpg&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}]}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/120825_Chart_bce51bb21765204045996.jpg" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />And on AInvest’s <a href="https://www.ainvest.com/news/ai-investor-wall-street-rebel-michelle-connell-wrong-risk-2512/" target='__blank'>&quot;Capital &amp; Power&quot; podcast</a> Michelle Connell, founder and chief investment officer of Portia Capital Management, argues that investors may be worried about the wrong risks. “What worries me are the private markets, the credit that we&#39;ve talked about earlier,” she tells the host, pointing to signs of “bleeding around the edges” in regions once thought insulated. On AI equities, she adds: “Do I think it&#39;s a bubble? No… but I think you can make more money in other places.”As trading gets under way, the combination of IBM’s big bet on AI infrastructure, Wedbush’s map of potential AI laggards and warnings about unprofitable small caps and stretched private-credit structures offers a reminder that the AI boom is creating as many fault lines as opportunities, both within tech and across the wider market.

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