By Martin Baccardax
"Give it to me straight, Doc, I can take it," is a classic comedic setup for the delivery of bad news that, more often than not, has an outcome that's far different than expected.
Watching the market's reaction to a series of statements, benchmarks, forecasts, and spending targets tied to the AI investment boom feels similarly unpredictable -- though far less funny.
If you're Microsoft, for example, growing your flagship cloud business by nearly 40%, while setting aside some of your compute power to build market share with your signature AI agent, Copilot, would seem like a good thing to tell investors -- especially after topping Wall Street forecasts in the December quarter.
Well, no. The $3.2 trillion company's stock suffered its biggest single-day decline in six years and now sits nearly 10% lower for the year.
If you're Meta Platforms, and you tell investors that you're going to blow past Street forecasts for capital spending -- even though you don't have a data-center business to generate cash and margins in your ad business are narrowing -- you might think investors would be concerned.
Again, no. Meta stock soared nearly 8% last week and is up more than 10% this year.
Which brings us to Oracle, which told investors Sunday night that it plans to raise $50 billion in new capital -- roughly half in new debt -- to build AI capacity to meet the spending commitments of its biggest customers.
However, one of those clients, ChatGPT maker OpenAI, may not recieve the $100 billion in new investments it had expected from chip maker Nvidia. And Oracle, which is already carrying about $108 billion in debt, may not generate positive free cash flow until 2030, and could risk losing its investment-grade credit rating as a result of its AI ambitions.
"Oracle's AI strategy carries material credit risks given the aggressive spending, uncertain path to profitability, and very high customer concentration to a start-up company," Standard & Poor's said Monday.
But the stock is up 3%, its bond prices are rising, and the extra yield investors are paying to insure against default has narrowed.
In a market filled with uncertainty -- from interest rate policy to geopolitical risks to the promise of AI itself as a game-changing technology -- investors appear to be rewarding the "give it to me straight" approach.
"While the criticism [on the levels of AI spending] will continue, we loudly applaud the transparency of Nvidia and Oracle over the last few days as investor white knuckles abound in the tech trade starting off in 2026," Wedbush analyst Dan Ives said.
Oracle does appear to have drawn a line in the sand for 2026 capital raising, while also signaling confidence by opting to issue $20 billion in new equity and preferred shares that convert at a higher price than at issue, in order to help fund those plans.
The company also raised its revenue forecast for the next fiscal year, which begins in June, by $4 billion, and now sees an overall topline tally of nearly $90 billion.
Meta was equally forthcoming, and risked near-term pressure on its stock by clearly flagging a $135 billion capital-expenditure target for 2026 during its fourth-quarter earnings call last week.
Amazon and Alphabet -- two of the so-called Big Four hyperscalers along with Meta and Microsoft -- will report December-quarter earnings later this week.
Analysts expect Amazon to unveil 2026 capex plans near $150 billion when it reports on Feb. 5, while the Google parent will guide investors to a bill nearing $140 billion a day earlier. Those figures would represent increases of roughly 20% and 50%, respectively, from 2025 levels.
"Given Meta's capex guide was significantly above Street estimates, we expect sustained, elevated sector-wide infrastructure investment," said Bank of America research analyst Justin Post.
Their best approach now, it seems, is to play it straight. Eye-watering capex, like a blunt medical diagnosis, can sometimes sound far scarier than it ultimately proves to be.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 02, 2026 11:31 ET (16:31 GMT)
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