WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

NEW MERCH ALERT - WEALTHY RED - Limited Quantities - Grab Yours Today! CLICK HERE

So Much For Rates Cut Aren’t A Foregone….

How many rate cuts can Wall Street squeeze out of a nervous Fed before the economy says “that’s enough”? Around that macro story, you had quieter earnings, simmering geopolitical risk, and a tech tape that still thinks AI is a feature, not a bug.

The Fed delivered its third 25 bp cut of the year, taking the funds rate down to a 3.5%–3.75% range, the lowest since 2022. The decision was anything but unanimous, with multiple dissenters worried that inflation is still too sticky to be declaring mission accomplished.

Headline and core inflation are hovering in the high‑2s to 3% range, comfortably below the 2022 scare but still north of the Fed’s 2% target. The official line is: growth looks okay, inflation is better, but the labor market is soft enough to justify a gentle easing path rather than a victory lap.

Equities liked the “Fed is easing but not panicking” narrative, with the S&P 500 up roughly mid‑teens percent year‑to‑date and extending a bull market that’s closing in on a 90% gain from its 2022 lows. Futures markets now see cuts as the default option, not a tail risk, which helps multiple expansion even as earnings growth moderates.

Under the hood, the usual pattern is back: quality growth and large‑cap tech are still the market’s emotional support animals, while cyclicals trade every data point like it’s a referendum on recession odds. Volatility is being suppressed by the belief that every wobble will be met with either a rate cut, a fiscal sweetener, or both—great for risk assets in the short term, dangerous if growth surprises to the downside.

This wasn’t a blockbuster earnings week, but the reports that did trickle in told a familiar story: beats are being rewarded less, misses more. With the index already up strongly on the year, the bar is less “did you beat?” and more “did you beat, guide higher, and show operating leverage while talking up AI and cost discipline?”

Across sectors, margins remain the battlefield. Companies with pricing power and clean balance sheets can live with 3.5%–3.75% money; heavily levered names cannot. The market is quietly re‑rating anything that looks like a “levered bet on low rates forever” back to reality, even while the index level makes new highs.

Geopolitics stayed in that uncomfortable zone where nothing broke this week, but everything feels one headline away from repricing. Ongoing conflicts in Eastern Europe and the Middle East, plus a more openly protectionist U.S. stance, keep tariffs, sanctions, and supply chain disruptions on the table.

For markets, the big story remains economic nationalism: higher tariffs, tighter export controls, and more “friend‑shoring,” especially in semiconductors and critical tech. That’s inflationary over the medium term, supportive for some domestic capex themes, and a reminder that the 2% inflation world was a policy choice, not a law of nature.

Tech, especially AI‑adjacent names, continues to act like its own asset class layered on top of the macro. With U.S. indices expensive versus the rest of the world—forward P/Es north of 25x vs about 16x ex‑US—the market is effectively saying, “Yes, it’s rich, but where else are you going to find leading AI, chips, and software at scale?”

The kicker: in a world where rates have likely peaked but won’t revisit zero, capital allocation matters more than ever. Tech firms that can convert AI hype into free cash flow, prudent buybacks, and real moats will keep their premium; those that can’t will learn what “multiple compression” feels like when the cost of capital is no longer a rounding error.

On the macro health front, the biggest story is still economic, not epidemiological: a cooling labor market that’s softening wage growth and giving the Fed cover to cut. Recent private payroll data have shown slowing job creation and weaker hiring intentions, a sharp contrast to the roaring post‑pandemic labor market.

For households, that means a strange mix: slightly easier borrowing costs but a bit more job insecurity at the margin. That cocktail tends to favor quality over speculative assets and makes “stay invested, but know what you own” more than just a personal finance platitude.

Put it together and you get a market trading on a very specific dream: a gentle Fed, an okay economy, manageable inflation, and no geopolitical accident. If that script holds, rate‑sensitive assets, quality growth, and cash‑generative tech can keep working, while anything dependent on ultra‑cheap money or flawless global cooperation remains vulnerable.

For a long‑term investor, the playbook doesn’t change: respect the macro, but let fundamentals drive decisions. Rate cuts are a tailwind, not a strategy; geopolitical risk is a feature, not a bug; and in a 3.5%–3.75% world, free cash flow, balance sheet strength, and sensible valuations matter more than ever.

 WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

NEW MERCH ALERT - BILL GATES BLACK - Limited Quantities - Grab Yours Today! CLICK HERE

The Oracle Of AI Narratives…

Oracle just delivered one of the strangest earnings “beats” of the AI era: huge backlog, big EPS upside, eye‑watering AI contracts… and a 13% share price face‑plant that turned the company into Exhibit A for “when AI narratives run ahead of cash flows.”

On the surface, fiscal Q2 2026 looked solid.
Revenue grew 14% year over year to about 16.1 billion dollars, with cloud sales up 34% and infrastructure up a blistering 68%. Adjusted EPS came in around 2.26, a massive beat versus roughly 1.64 expected, but revenue missed estimates by a hair, and that “small” miss mattered in a stock that had been priced like a pure‑play AI winner.

Under the hood, Oracle unveiled a staggering 523 billion dollars in remaining performance obligations (RPO), up more than 400% and well ahead of already lofty forecasts. On the call, management credited new multi‑year commitments from Meta, Nvidia and others, and guided to nearly 20%+ revenue growth next quarter with cloud up 40%‑plus.

Then came the part that broke the narrative: the OpenAI mega‑deal and the capex required to support it.

Oracle has lined up a roughly 300 billion dollar, five‑year cloud compute agreement to supply 4.5 gigawatts of AI capacity to OpenAI starting later this decade, with analysts pegging implied annual compute spend near 60 billion dollars. To feed that monster (plus other hyperscaler and social contracts), Oracle’s data‑center program—anchored by “Stargate”‑style sites—now runs into the hundreds of billions of dollars of cumulative infrastructure across partners, with cost estimates of 50–60 billion per gigawatt of capacity.

In this quarter alone, capex ran about 12 billion dollars, far above expectations near 8.25 billion, and management hiked 2026 capital‑spending plans by another 15 billion on top of prior guidance. Investors suddenly realized this isn’t just “buy some GPUs and flip them for margin”—it’s a multi‑year, debt‑and‑lease‑fuelled build that turns Oracle into the landlord for an AI tenant still figuring out its own economics.

Leading into the print, the bull case was simple: Oracle is the underdog hyperscaler, riding a once‑in‑a‑generation AI build‑out with a backlog that looks like a sovereign bond table. The market happily extrapolated booked revenue into future free cash flow, assuming AI demand would effectively “pay for itself” long before the bills came due.

Suddenly, you had a company with 16.1 billion of quarterly revenue and 67 billion of expected annual sales promising infrastructure commitments that, in aggregate, belong more in an energy‑company capex deck than a software vendor’s. The AI doom‑sayers rushed in to point out the obvious: relying on future revenue from OpenAI—whose own path to sustainably funding a 300 billion dollar compute tab is still theory, not fact—looks less like cloud and more like project finance with beta.

If building a gigawatt of AI data‑center capacity runs 50–60 billion dollars, then servicing OpenAI‑scale contracts plus other hyperscaler and social clients implies a capex pipeline that could easily encroach on half a trillion dollars across the ecosystem over time. OpenAI, meanwhile, is reportedly lining up over a trillion dollars in total infrastructure commitments spread across Oracle, Microsoft, and others, a figure that dwarfs its current revenue and even optimistic near‑term monetization scenarios.

In that framing, Oracle looks less like a database company and more like a highly levered utility building out power plants for a single, very ambitious offtaker. When you combine that with a small revenue miss, cautious software growth, and guidance that undershot the Street’s top‑line dreams, you get a 13% “repricing event” that barely blinked at the EPS beat.

That’s why this quarter instantly became a referendum on the entire AI build‑out.
Commentary from analysts and financial press explicitly framed Oracle as a bubble barometer: if a 523 billion dollar backlog and 34% cloud growth cannot keep the stock bid when capex spikes, maybe the market is finally demanding proof that AI demand converts into free cash flow on something like a normal time horizon. Other AI‑linked names—from GPU vendors to alternative cloud providers—sold off in sympathy as traders asked the forbidden question: “What if the bottleneck isn’t chips, but basic economics?”

Oracle’s infrastructure revenue now exceeds its flagship applications business, and management insists that most of its capex is for revenue‑generating equipment, with land and power handled via leases that don’t hit the balance sheet upfront. RPO growth of more than five‑fold in a single year suggests customers really are locking in massive AI workloads; the issue is timing and margin, not demand.

Oracle shares dropped roughly 11–13% in the immediate aftermath of the report, their worst single‑day decline in months, as AI‑themed investors realized they owned a story stock that had quietly morphed into a capital‑intensive infrastructure builder. A wave of post‑earnings downgrades cut price targets by mid‑teens percentages, with notes explicitly calling out the risk that AI spending “outruns returns” for years.

In one quarter, the narrative went from “Oracle is late to cloud but early to AI” to “Oracle is early to the bill and late to the cash.” That doesn’t mean the OpenAI deal is bad—locked‑in, multi‑year, usage‑based contracts can be phenomenal if workloads ramp as promised—but it forces investors to underwrite not just Oracle’s execution, but the solvency and business model of its star customer.

For long‑term investors, there are two clear lessons buried beneath the hot takes.
First, backlog is not free cash flow; a 523 billion dollar RPO number is impressive, but it is only as good as the margin structure, the power contracts, and the creditworthiness of the counterparties behind it. Second, AI infrastructure is starting to look like a classic capital cycle: eye‑popping spend, aggressive build‑outs, and a market suddenly re‑discovering that returns on invested capital matter, even when everyone is talking about models, not multiples.

Oracle’s quarter did not kill the AI boom; it just reminded everyone that gravity still applies inside data centers. The next act in this story will be simple: either AI usage ramps fast enough that 300 billion‑style contracts look conservative in hindsight, or investors will look back at this 13% drop as the moment the market started demanding receipts instead of roadmaps.

WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

NEW MERCH ALERT - BUY THE DIP NAVY - Limited Quantities - Grab Yours Today! CLICK HERE

Quick Links…

Wanna Smoke…

Now We Are All Doomed…

The Markets Are Changing…

Thank you for reading, we appreciate your feedback—sharing is caring.

Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report