Yorkville Ives names top software pick for 2027: Microsoft leads on AI strength

Oracle (ORCL) stock rose 6% to $125.81 after a $20B stock and bond sale, despite a 35% YTD decline. The company sold 86.2M shares at $116 each and issued bonds with coupons up to 8.65%. Analysts have mixed views on the move, with bulls citing a cleared overhang and bears pointing to high interest costs. CoreWeave (CRWV) and Microsoft (MSFT) also saw gains, up 7% and 2% respectively.

Marvell Technology agreed to buy Lumentum Holdings in an all-stock deal valued at $115B, including debt. Marvell shares fell 12.7% and Lumentum dropped 18.6% on the news. The deal, expected to close by 2028, aims to create an AI connectivity leader, with Marvell shareholders owning about two-thirds of the combined company. Both companies' stocks underperformed the implied deal price, reflecting market doubts about the terms and timing.

Microsoft raised $25 billion through a bond sale to fund AI, cloud, and data-center investments. The funds will support capital expenditure, acquisitions, and debt repayment. Demand for Azure services has outpaced supply, driving infrastructure expansion. Microsoft's AAA credit rating attracted strong investor interest, with orders reaching $115 billion. The company projects $175 billion in capital expenditure by 2026.

Apple (AAPL) shares fell 4% despite beating earnings estimates, as higher memory costs squeezed margins. Q4 FY2026 EPS was $2.10 on $114.48B revenue, but guidance for December-quarter gross margin (45-46%) fell below estimates due to rising memory and AI costs. CEO John Ternus cited unprecedented memory pricing. Microsoft (MSFT) and Alphabet (GOOGL) also dipped, while Meta (META) held steady.

Microsoft's slight reduction in AI-related capital expenditures was rewarded by investors, with shares falling less than peers. The company reported strong cash flow and Azure revenue growth, while Alphabet and Oracle faced market skepticism due to debt and equity financing for their AI spending. Microsoft's full-year capex is expected to reach $170 billion, with Q2 spending over $50 billion.

Apple generated $136 billion in free cash flow in its fiscal year ended September, a 38% increase from the previous year. This is roughly twice the combined free cash flow of Microsoft, Meta, Alphabet, and Amazon. Apple spent $9 billion on capital expenditures, while the other four companies spent over $600 billion. Apple's net cash rose to $57 billion, and it returned $102 billion to shareholders through buybacks and dividends. The stock has gained about 25% this year.