For much of 2026 Wall Street has been facing an unpleasant question: what occurs when a firm’s business continues to grow but investors become tired of the stock?
The gap is appearing in various areas of the artificial-intelligence industry.
Although Oracle, Innodata, Sterling Infrastructure, MasTec and AppLovin are quite different companies, each of them puts forward the same line of argument: while substantial revenue, contracts or demand are already evident, the market is concentrating on the possible problems.
It doesn’t mean that they are therefore cheap.
That’s why they deserve a more detailed examination.
Oracle’s $638 billion receipt comes with a warning
Oracle is the most clear-cut case of this.
The company had $638 billion in remaining performance obligations at the end of fiscal 2026, which is an increase of 363% compared with the previous year.
Revenue from cloud infrastructure in the fourth quarter increased by 93%, and total quarterly revenue rose by 21% to $19.2 billion.
The catch is enormous.
In fiscal 2026 Oracle produced operating cash flow of $32 billion but had negative free cash flow of $23.7 billion since it had invested large amounts in AI infrastructure.
The company also stated that it raised $43 billion through debt financing during the fiscal year and expects to secure about $40 billion in debt and equity financing in fiscal 2027.
Reuters has reported that almost half of Oracle’s RPO is linked to OpenAI, which poses a concentration risk.
Colby Stilson, who heads fixed income at Brown Advisory, stated that an investment thesis based on future revenue from such risky companies becomes “even more tenuous”.
That concludes the discussion about the Oracle.
The order book is remarkable, but investors are being asked to place their trust in the idea that huge future demand will make it worthwhile to carry out huge spending at present.
Innodata and Sterling sell the picks and shovels
Innodata is smaller and much more speculative, yet its figures show that investors continue to go back to the company.
The AI data-engineering company reported second-quarter revenue of $92.1 million, an increase of 58% compared to the previous year, with adjusted EBITDA rising by 92%.
Customer concentration is likewise on the rise.
Innodata stated that its largest customer accounted for 37% of second-quarter revenue, a decrease from 56% in the first quarter, while another major technology customer increased its share to 34%.
Sterling Infrastructure presents a more physical expression of the same ‘picks and shovels’ idea, since its E-Infrastructure business builds up sites and electrical systems for data centres, semiconductor factories and other important facilities.
At the close of June Sterling reported a signed backlog of $4.33 billion and a combined backlog of $5.62 billion (https://www.strlco.com/news/sterling-reports-record-second-quarter-results-and-raises-full-year-2026-guidance/).
Ninety-two per cent of the E-Infrastructure backlog consisted of mission-critical projects and second-quarter revenue increased by 90% to $1.17 billion.
The valuation still requires execution, but a great deal of the work has already been booked.
MasTec is betting on the power behind AI
MasTec is one stage further along the infrastructure chain since data centres require electricity, transmission, communications and ever more complex electrical construction.
The company announced that it had achieved a record second-quarter revenue of $4.4 billion and that its 18-month backlog now stands at a record $21.4 billion, which is $4.9 billion more than the figure from the previous year.
Furthermore, since it has acquired The Superior Group, MasTec is now more involved in the electrical work for data centres.
As Investor’s Business Daily pointed out, the Baird researchers referred to the transaction as “incrementally positive”, although they also cautions regarding regulatory exposure, economic sensitivity and competition.
Those risks are real.
So is the backlog.
AppLovin may be the quality outlier
AppLovin is unlike the others since it doesn’t have to spend tens of billions of dollars on building up physical infrastructure; instead, its AI-driven advertising platform is generating large amounts of cash.
Revenue in the second quarter was $1.92 billion, a year-on-year increase of 53 per cent.
Net income amounted to $1.27 billion and free cash flow was $863 million.
The company had guided its adjusted EBITDA margin for the third quarter to 83 per cent.
AppLovin can therefore be considered the highest-quality business in the group, but its large fluctuations illustrate how quality and volatility can coexist.
The larger opportunity
The five stocks in question aren’t part of a single trading opportunity.
Oracle faces financing risks as well as risks due to its concentration of customers.
Innodata is small in size and is highly valued.
Sterling and MasTec rely on ongoing infrastructure spending and on successful execution.
AppLovin is still vulnerable to changes in advertising economics and to the high expectations that have been placed on it.
Yet the common thread is hard to overlook.
AI investing is no longer focused on chip companies; the next phase is becoming more concerned with cloud capacity, training data, building facilities, electricity, and monetization.
This is evident from recent investments in infrastructure and the development of data centres, showing just how much capital is flowing into that ecosystem.
Companies which currently have work that is signed, are experiencing an increase in their backlogs or are generating strong cash flow should receive greater attention whenever their share prices fall.
The chance involved is not merely the act of purchasing something that had fallen.
Working out whether the business went with it.
Disclaimer:
This article is for informational and educational use only and should not be regarded as financial, investment or trading advice.
The stocks mentioned may be volatile and previous performance does not ensure future results.
Individuals who are considering making investment decisions should carry out their own research and perhaps seek advice from a qualified financial professional.
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