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AI had a strange week
Meta launched Muse, a personal AI agent that can send emails, shop, book travel, and keep working after you close the app. Muse reached #3 in the US App Store within two days, and Meta says usage has already blown past expectations.
More importantly, it pushes Meta into the race to own the consumer agent, leveraging its massive distribution today and AI glasses tomorrow. New $20 and $100 monthly tiers also offer one of Meta’s clearest paths yet to monetizing AI beyond advertising.
Meanwhile, Anthropic researcher Jacob Coxon quit, warning that leading AI labs are "gambling with our lives." Anthropic alignment lead Evan Hubinger went further, putting the odds of AI killing all humans within the next decade above 10%. Not exactly ideal PR ahead of a potential IPO.
On that cheerful note, Apple just kicked off the Ternus era with its latest iPhone launch, while Oracle faced another test of the AI infrastructure boom.
Today at a glance:
📱 Apple: The $2,000 iPhone
☁️ Oracle: 850 Megawatts Later
1. 📱Apple: The $2,000 iPhone
New Apple CEO John Ternus just unveiled the iPhone Duo, the company’s first foldable phone, alongside the iPhone 18 Pro, new Watches, and AirPods.
The Duo starts at $1,999 and can reach an eye-watering $3,199 with 2TB of storage. It was actually less than some analysts expected given the current RAM-aggeddon. But beyond the sticker shock, the launch says a lot about where Apple sees its next growth opportunities.
Dominating a tiny market
Apple is seven years late to foldables. Samsung launched its first Galaxy Fold in 2019, yet the category still represents only about 2% of global smartphone shipments.
That could change quickly. Industry estimates suggest Apple could sell roughly 6 million Duos in 2026 despite launching in late October, potentially capturing around a quarter of the foldable market almost immediately. Some forecasts see first-year sales approaching 10 million units.
That would be an impressive entrance, but it also puts the opportunity in perspective. Apple sells well over 200 million iPhones each year. Even 10 million Duos would represent only a small fraction of its annual volume.
So Apple could become one of the largest foldable vendors almost overnight without foldables becoming a major growth driver.
Pushing iPhone prices higher
Apple generated roughly $210 billion of iPhone revenue last year, so even a successful Duo launch is unlikely to transform the company. If Apple sells 10 million at an average price around $2,000, that would represent roughly $20 billion of revenue. But most of those customers would have bought another iPhone anyway.
iPhone remains Apple’s core cash engine, but hardware growth now relies almost entirely on pricing power rather than unit volume.
What matters here are the incremental economics. Someone opting for a $1,999 Duo instead of a $1,299 Pro Max adds roughly $700 of revenue per customer. Across 10 million buyers, that’s ~$7 billion of incremental revenue before considering the much pricier storage configurations.
Apple is also raising prices elsewhere after the recent memory crunch. The new iPhone Pro and Pro Max both increased by $100, while several older models also became more expensive. There is no standard iPhone 18 this fall either, meaning anyone who wants the newest generation has to buy a Pro or Duo.
The Duo may remain niche, but it gives Apple room to push iPhone average selling prices materially higher.
Turning AI into an ecosystem feature
Apple also used the event to clarify where it fits in the AI race.
Ternus spent time describing an Intelligent Personal Hub, walking through the features the perfect AI device would need and making it sound like he was about to unveil something revolutionary. He concluded that this device already exists. It’s the iPhone. It sounded almost like an early rebuttal to OpenAI and Jony Ive’s work on a new AI device.
The new Siri can use personal context from messages, emails, photos and apps, understand what is on the screen, and take actions across the operating system. Apple is extending similar capabilities to the Watch, including AI-generated recaps and health insights.
That is a very different strategy from OpenAI or Anthropic. Apple does not need users spending hours inside an Apple chatbot. Its advantage is controlling the device, operating system, and personal context where AI can become useful.
Apple can also rely on outside models when needed while keeping control of the customer experience. In other words, Apple does not necessarily need to win the foundation-model race to benefit from AI.
The monetization is indirect too. Better AI can make the next iPhone more compelling, increase attachment to the Watch and AirPods, and make it harder to leave the ecosystem. Apple does not need a $20 monthly Siri subscription if AI helps sell more $1,200, $2,000, or even $3,000 devices.
Takeaway: The Duo is the flashy part of this week’s launch. But the broader strategy is familiar. New technology gives customers another reason to move up the hardware ladder and stay within the ecosystem.
2. ☁️ Oracle: 850 Megawatts Later
Oracle’s AI story has been easy to summarize over the past year. It signed enormous contracts first, spent enormous sums building the capacity to serve them, and promised the revenue would follow.
That promise finally started showing up in the August quarter.
Oracle delivered 850 megawatts of new data center capacity in Q1 FY27, almost triple what it delivered in Q4 FY26, while deploying more than 300,000 GPUs. OCI revenue more than doubled, total revenue accelerated to 30% growth, and the company still added another $26 billion to its enormous backlog.
The stock jumped after hours. After months of concern about Oracle’s debt, dilution, and massive AI spending, investors finally got more evidence of what all that money is buying. But even after the bounce, shares remain roughly 50% below their September 2025 peak.
Q1 FY27 in numbers:
🚀 Growth accelerated again: Revenue reached $19.3 billion, up 30% Y/Y and ahead of Oracle’s 27%–29% guidance. Adjusted EPS reached $1.92, comfortably above the $1.74 consensus.
☁️ OCI more than doubled: Cloud revenue grew 62% to $11.6 billion, led by OCI growth of 121% to $7.4 billion. Cloud applications grew a much slower 10% to $4.2 billion, while traditional software revenue fell 3% to $5.6 billion.
📦 The backlog is still growing: RPO reached $664 billion, up $209 billion Y/Y and $26 billion sequentially. Oracle booked more than $30 billion of additional AI cloud contracts during the quarter, even as it began converting more of the existing backlog into revenue.
💰 The CapEx number needs some context: Reported CapEx reached an extraordinary $28.5 billion, contributing to roughly $5 billion of negative free cash flow (and $29 billion in the past 12 months). But customer prepayments covered $11 billion of the infrastructure spending, bringing Oracle’s net cash outlay to roughly $18 billion. Oracle also completed its previously announced $20 billion equity offering. Oracle is burning cash to build infrastructure, but customer checks are softening the blow.
So what to make of all this?
📈 The backlog is becoming real revenue: OCI growth accelerated from 93% to 121% as Oracle nearly tripled the capacity it brought online. The bull case is no longer based only on a giant RPO number. Oracle is now showing it can turn that backlog into revenue, while demand for AI training and inference still exceeds available capacity.
💵 Customers are sharing the financing burden: Customer prepayments are becoming a meaningful part of Oracle’s AI funding model. The company still had to fund roughly $18 billion of net CapEx in Q1, but customers effectively financed more than $11 billion of the buildout. Oracle also said its latest $30+ billion of AI contracts require no incremental increase to its planned capital raise.
⚖️ Gross margins are under pressure: Oracle’s gross margin fell roughly 6 percentage points Y/Y as lower-margin OCI became a much larger part of the revenue mix. But that pressure has not flowed through to operating margins yet. GAAP operating margin expanded by nearly 6 points to 35%. So far, operating leverage elsewhere is absorbing the infrastructure mix shift.
What to watch
Oracle expects cloud revenue growth to accelerate again to 65%–71% in Q2 FY27. With demand already under contract, attention is increasingly shifting to execution and economics. Can Oracle bring capacity online fast enough, fund roughly $70 billion of net CapEx this year, and maintain attractive margins as infrastructure becomes a much larger part of the business?
Takeaway: Oracle no longer needs to prove that AI demand exists. Q1 showed that it can turn that demand into capacity and revenue at remarkable speed. The remaining question is whether the economics justify the enormous capital required to get there. This quarter was an important step toward proving they can.
That's it for today.
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Disclosure: I own AMD, AMZN, GOOG, META, and NVDA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Good breakdown. What gets me is the price: down 54% from the high, 13.7x forward earnings, 0.91 PEG — for 30% accelerating growth. The market's still pricing Oracle like AI demand is unproven. After this quarter, not sure what's left to prove.