Market Overview - U.S. equity markets ended the fourth quarter positively, with the S&P 500 and Nasdaq 100 rising 2.4% and 2.6% respectively, while the Dow Jones Industrial Average led with a 3.6% return [2] - The Russell 1000 Growth Index lagged, increasing only 1.1% as investors shifted from high-growth technology stocks to more defensive sectors [2] - The quarter was marked by significant volatility, influenced by a 43-day government shutdown that affected market transparency and risk appetite [2] Economic and Monetary Policy - Approximately 83% of S&P 500 companies reported positive earnings surprises, indicating a broadening economic recovery beyond the "Magnificent Seven" [4] - The Federal Reserve implemented two 25-basis point cuts, bringing the federal funds rate to a range of 3.50% to 3.75% by year-end, and concluded its quantitative tightening program [4] - The Fed's balance sheet expanded by approximately $100 billion to $6.6 trillion, reflecting a shift from "abundant" to "ample" bank reserves [4] Sector Performance - Ithaka's portfolio underperformed the Russell 1000 Growth Index by 700 basis points, with stock selection detracting 740 basis points from relative performance [6] - Positive relative returns were generated in the Materials and Processing sector, while Technology and Consumer Discretionary sectors were significant sources of underperformance [7] - Weakness in Technology was attributed to fears of AI disintermediating software stocks, while Consumer Discretionary faced pressures from consumer spending concerns [7] Top Contributors and Detractors - Top contributors included Intuitive Surgical (26.6% return), Advanced Micro Devices (32.4%), and Alphabet (28.9%), driven by strong earnings and positive investor sentiment [9][10][12] - Major detractors were ServiceNow (-16.8%), Netflix (-21.8%), and Veeva Systems (-25.1%), with concerns over AI impacts and unexpected financial disclosures affecting stock performance [9][15][16] Investment Strategy and Outlook - Ithaka initiated three new positions and eliminated four during the quarter, with a trailing 12-month turnover of 22.1% [17] - The investment approach focuses on long-term wealth creation through concentrated positions in high-quality companies with strong management and favorable market conditions [4][19] - The narrative around AI is shifting towards tangible productivity gains, suggesting that the economic opportunities from AI will continue to expand [18]

Summary of Global Software Conference Call Industry Overview - The software industry is experiencing a significant shift in focus from macroeconomic concerns to the disruptive rise of AI, with investor discussions centered around whether an AI bubble exists and the potential impact of AI on enterprise software [1][11][15]. Key Themes for 2026 - **Valuation Reset**: Software valuations have halved over the past year, creating opportunities for investors to acquire high-quality stocks at discounted prices [14][31]. - **IT Spending Outlook**: Recent CIO surveys indicate one of the strongest IT spending outlooks since 2018, with expectations for a stable macro environment and lower interest rates supporting demand, particularly among small and medium-sized businesses (SMBs) [3][13][23]. - **Generative AI Impact**: While Generative AI is a major topic, its actual revenue impact on software companies is still limited. Most companies are not yet seeing significant revenue from AI, and the focus is shifting towards company-specific opportunities [6][15][19]. Company Recommendations - **Buy Recommendations**: - **Oracle (ORCL)**: Strong core business with significant cloud transition and market share gains in IaaS/PaaS, driven by unique offerings [4][27]. - **Microsoft (MSFT)**: Durable business with multiple growth levers and a reset valuation, positioned well for AI monetization [4][27]. - **SAP (SAP)**: Consistent double-digit revenue growth and margin improvement, despite AI cycle noise [4][27]. - **HubSpot (HUBS)**: Attractive entry point with strong SMB market positioning and potential benefits from AI adoption [4][27]. - **Cautionary Recommendations**: - **Salesforce (CRM)**: Concerns over underperformance and potential reliance on acquisitions to drive growth [4][29]. - **Snowflake (SNOW)**: Long-term growth concerns due to market saturation and competitive pressures [4][30]. - **Workday (WDAY)**: Growth deceleration and investor skepticism regarding AI's impact on its business model [4][28]. Financial Metrics - **Valuation Comparisons**: - Adobe (ADBE): Adjusted P/E ratios have decreased significantly, with a current valuation of 12.0x for 2026E [5][32]. - Microsoft (MSFT): Current P/E at 27.5x for 2026E, reflecting a reset from previous highs [5][32]. - Oracle (ORCL): Trading at a 0.9x PEG ratio, down from 1.4x a year ago, indicating a significant valuation adjustment [32]. Macro Considerations - **Economic Environment**: The macroeconomic landscape is expected to stabilize, with potential benefits from deregulation and tax cuts in the U.S. impacting SMB spending positively [6][23]. - **AI Adoption Timeline**: Enterprise adoption of AI is anticipated to take longer than expected, with significant visibility likely not occurring until 2027 or 2028 [22][23]. Conclusion - The software sector is at a pivotal moment, with significant valuation resets providing investment opportunities. However, the actual impact of AI on revenue generation remains uncertain, necessitating a cautious approach to investment in this space. The focus should be on companies with strong fundamentals and clear growth trajectories amidst the evolving landscape of AI and macroeconomic conditions [1][14][19].

Group 1 - The global market risk appetite has significantly decreased following President Trump's renewed tariff threats towards Europe, leading to a sell-off in major stock indices [2][3] - The Dow Jones Industrial Average fell by 870.74 points, a decline of 1.76%, closing at 48,488.59 points; the S&P 500 dropped by 143.15 points, down 2.06%, at 6,796.86 points; and the Nasdaq Composite decreased by 561.07 points, a 2.39% drop, ending at 22,954.32 points, marking the worst single-day performance since October 10 of the previous year [2] - Major tech stocks experienced declines, with Nvidia down 4.32%, Apple down 3.45%, and Microsoft down 1.16%, among others [2] Group 2 - The CBOE Volatility Index (VIX), often referred to as the "fear index," rose to a two-month high, reflecting increased market anxiety [3] - Trading volume on U.S. stock markets reached approximately 20.6 billion shares, significantly above the 20-day average of 17.01 billion shares, indicating concentrated selling pressure [3] - Analysts suggest that the current geopolitical tensions regarding tariffs are more of an emotional shock rather than a fundamental change that would trigger a deep market correction [3] Group 3 - The global bond market is also experiencing spillover effects, with upward pressure on some European government bonds due to potential increases in defense spending [4] - The yield on the U.S. 10-year Treasury note reached a high of 4.313%, the highest since late August, closing at 4.287% after a rise of 5.6 basis points [5] - Market expectations for interest rate cuts by the Federal Reserve have been adjusted downward, with projections for a reduction of approximately 47 basis points in 2026, down from 53 basis points at the end of the previous year [5] Group 4 - Netflix reported fourth-quarter revenue of $12.1 billion, exceeding market expectations of $11.97 billion, with adjusted earnings per share of $0.56, also slightly above forecasts [6] - The company anticipates full-year revenue for 2026 to reach between $50.7 billion and $51.7 billion, with expectations for advertising revenue to potentially double in the future [6] - Following the announcement, Netflix's stock price fell by 4.9% in after-hours trading, influenced by merger financing and market sentiment [7] Group 5 - Gold prices surged significantly, with spot gold rising approximately 2% to $4,757.33 per ounce, reaching a historical high of $4,756.93 during the session [7] - Silver prices experienced a slight decline of 0.3%, settling at $94.38 per ounce, after hitting a record high of $95.87 [7] - Oil prices showed volatility, with light crude oil futures for February delivery rising by $0.90 to $60.34 per barrel, a 1.51% increase [8]

Fears over Oracle's AI debt load and OpenAI concentration are overblown — and they mask a massive long- term opportunity, according to Guggenheim. ...

Oracle shares have lost nearly $400 billion in value over the past four months, to near their lowest levels since early June. They are seen as a market-listed proxy for both OpenAI and the titanic amounts of capital being committed to the artificial intelligence investment boom. ...

Core Insights - Oracle Corporation (ORCL) has emerged as a highly volatile and prominent player among large-cap tech stocks in 2025, attracting significant investor interest due to its substantial RPO growth and an ambitious target to exceed $140 billion in revenue [1] Company Overview - Oracle is recognized as a database giant, indicating its strong position in the technology sector [1] - The company has been actively capturing the attention of investors, which suggests a robust market presence and potential for future growth [1] Analyst Background - Gary Alexander, who has extensive experience in covering technology companies on Wall Street and working in Silicon Valley, provides insights into the themes shaping the industry [1] - His contributions to Seeking Alpha since 2017 and his exposure to seed-round startups highlight his credibility and expertise in the tech investment landscape [1]

Core Insights - Oracle Corporation (ORCL) has emerged as a highly volatile and prominent player among large-cap tech stocks in 2025, attracting significant investor interest due to its substantial RPO growth and an ambitious target to exceed $140 billion in revenue [1] Company Overview - Oracle is recognized as a database giant, indicating its strong position within the technology sector [1] - The company has garnered attention for its aggressive growth strategy, particularly in the context of its revenue projections [1] Analyst Background - Gary Alexander, who has extensive experience in covering technology companies on Wall Street and working in Silicon Valley, provides insights into the themes shaping the industry [1] - Alexander has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, indicating his influence and credibility in the investment community [1]

Group 1 - Major US tech stocks experienced a pre-market decline, with Oracle falling over 4% to $184.71, a decrease of 3.34% [1] - Other tech giants such as Amazon, Google, Tesla, AMD, Meta, and Nvidia also saw declines, with Amazon and Google dropping over 3% and Tesla, AMD, Meta, and Nvidia falling over 2% [1][4] - The three major US stock index futures continued to decline, with Dow futures down 0.90%, S&P 500 futures down 0.91%, and Nasdaq futures down 1.09% [2][5] Group 2 - Gold and silver prices reached new historical highs, with spot gold rising 1.21% to $4725.686 per ounce and spot silver increasing by 0.76% to $95.074 per ounce [5] - Gold mining stocks saw a pre-market increase, with Harmony Gold rising nearly 6% and other mining companies like Coeur Mining and Pan American Silver increasing by nearly 5% [5]

Core Insights - North American cloud service providers (CSPs) are significantly increasing investments in AI infrastructure, leading to a projected annual growth rate of over 28% in global AI server shipments by 2026 [1] - The demand for AI inference services is driving a replacement and expansion cycle for general servers, with an expected annual growth rate of 12.8% in global server shipments (including AI servers) by 2026 [1] Group 1: Market Trends - From 2024 to 2025, the server market will focus on training advanced large language models (LLMs) using AI servers equipped with GPUs and HBM for parallel computing [3] - Starting in the second half of 2025, the development of AI inference services such as AI Agents, LLaMA model applications, and Copilot upgrades will prompt CSPs to shift towards monetization and profit models [3] - The total capital expenditure growth rate for the five major North American CSPs (Google, AWS, Meta, Microsoft, Oracle) is projected to reach 40% in 2026, driven by large-scale infrastructure investments and the replacement of general servers purchased during the 2019-2021 cloud investment boom [3] Group 2: AI Server Market Dynamics - The 2026 AI server market will be primarily driven by North American CSPs, government sovereign cloud projects, and large CSPs accelerating their own ASIC development and edge AI inference solutions [4] - GPUs are expected to account for 69.7% of AI chip usage, with NVIDIA's GB300 models becoming the mainstream for shipments, while VR200 will gradually ramp up in the second half of the year [4] Group 3: ASIC Development - The share of ASIC AI servers in shipments is expected to rise to 27.8% by 2026, the highest since 2023, with growth rates surpassing those of GPU AI servers [6] - Google is leading the investment in self-developed ASICs, with its TPU not only serving Google Cloud Platform infrastructure but also being sold to external companies like Anthropic [6]

Core Viewpoint - The significant depreciation of Oracle Corporation's shares is likely to continue despite an increase in remaining performance obligations in recent quarters [1] Group 1: Company Performance - Oracle Corporation has seen a substantial increase in its remaining performance obligations over the last two quarters [1] Group 2: Market Sentiment - The Bears of Wall Street community focuses on identifying overvalued or weak companies with declining business prospects, suggesting that Oracle may fall into this category due to its recent performance [1]