Digging into the Bottlenecks of the AI Build-Out

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss:

• Oracle’s earnings results and capital spending plans.
• Are Oracle’s backlog and spending plans connected to the Anthropic and OpenAI IPOs?
• Identifying some pinch points of AI build-out.
• Question: Why do European stocks trade at a discount to the U.S. market?

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on June 11, 2026.

Tyler Crowe: Diving deep into the AI supply chain today on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors Jon Quast, Matt Frankel. We wanted to start the discussion today about AI spending, basically, and some of the nooks and crannies that a lot of that is falling into.

To do that, we want to start with the big news event of the day, and that was Oracle's earnings. They reported earnings early today, and the stock is down, premarket is down about 11% right around the time that we are taping. The numbers were pretty good, at least from a quarterly earnings perspective, but I think the biggest reason we saw this massive decline in the shares was because capex spending is going way, way up. They spent much more than they had expected. They were expecting $50 billion for this entire fiscal 2026, but they ended up spending $55. Their plan for 2027 was to add more to that to do about $70 billion in capital spending. Now, there's a lot of reasons for that. The remaining performance obligations, basically, however, hyperscalers are spending has gone way up, and we'll get into that. One of the things I think about with Oracle compared to the other hyperscalers is this is not like their bread and butter business. This is something they've been really getting into. Is this seeing these large, large numbers, is this like a risky approach? Is this like the way Oracle should be attacking this?

Matt Frankel: You're right that the earnings report was very strong, but the earnings are not the full story. If they were, the stock would probably be up today. Both revenue and earnings grew by 20% or more, they beat expectations, cloud revenue grew by 47%. The RPO number that you mentioned, it is simultaneously the company's biggest risk factor and the biggest bull case. Having a $638 billion backlog would be a dream of most companies. But when it's all tied to one customer, it does seem to be diversifying a little bit. It's now estimated that over 50% of that backlog comes from OpenAI as opposed to virtually all of it, not that long ago. The number that you just mentioned, it increased $85 billion sequentially, and so that's not OpenAI deals.

Prepaid AI contracts, it's worth mentioning, now total $75 billion of that, so that helps the need to raise capital, but there's still a pretty big gap there. Having said all that, the company does have a massive capex need. $56 billion in fiscal 2026, that's up from 21 billion a year ago, negative free cash flow for the first time in a long time and probably for the foreseeable future, if we're being honest, it could certainly pay off if OpenAI and the others can afford to pay for all of their committed spending. But it's still a risk factor in the near term, almost $130 billion in debt, and that's growing fast, and anytime you're adding debt quickly, you're adding risk.

Tyler Crowe: To your point, Matt, there's really no other way to do this to be fair. When the space is moving as fast as it is and you've got to spend a ton of money to build something that's very expensive upfront, of course, you're going to take on a lot of debt, and you're going to take it on very quickly. I want to be fair to Oracle, on the one hand, and also I want to acknowledge that it is a long game that the company is playing. This is the RPO number specifically. 638 billion, but over half of that is more than three years out. It's not expecting this money anytime soon. Now, that's a little bit risky for sure. Do I think that AI data centers are going to still be a big thing in three years? Yes. Do I think that all of that money is necessarily in the bag right now for Oracle? No, not necessarily. That's said. I mean, OpenAI, much of what it is doing is the Stargate Initiative, and there's a lot of companies involved in that. Also, the White House is supportive, so it's risky, but I wouldn't say that it's Humpty Dumpty risky.

Jon Quast: To your point with the idea of it being risky or not or something like that, one of the things that is it does seem like these companies are really dependent on, Matt, you said it was over 50% of it is OpenAI. I'm assuming a lot of it is Anthropic. We've seen Anthropics, OpenAI, these other AI companies in the world, they have been signing some very large checks related to spending on compute and stuff part of the reason when we discussed the S1 for SpaceX, I think it was last week or a couple of weeks ago, we were talking about Anthropic doing, I think, it was $1.2 billion per month in basically renting compute from SpaceX. A lot of what we're seeing here with these RPOs are similar deals. These are big, big numbers and a lot of money that they have to even cough up kind of upfront. That gets me to one of the things I've also seen: OpenAI just confidentially submitted their S1, so they're also planning on going public relatively soon. Anthropic already did it. We're expecting that S1. When we see these numbers coming out from Oracle, I'm starting to wonder, do you think that the reason these companies are going public right now is because the bills are starting to come due for some of these very large bills?

Matt Frankel: Don't be fooled just because they recently both did funding rounds. Anthropic very recently raised $65 billion. It's really rare for a company to have a big series F or G or whatever it was for this and then do an IPO almost immediately afterwards. It's because they know they'll burn through this capital very quickly and are going to need more. Fortunately for them, investors seem very happy to open their wallets right now and give them whatever they need. We're seeing this with demand for the SpaceX IPO. It's just a question of whether that's sustainable. In a year from now, if they wanted to do a big offering, would they still be able to do that? No, so they're rushing while it's a hot IPO market. The rush to IPO, especially if the market gives them $1 trillion valuations, which is expected, is driven by their massive capital needs. After all, it's really a lot easier to sell an IPO to investors than it is a follow-on offering, as Oracle has found out.

Jon Quast: Here's the thing with IPOs. You definitely want to go public when the timing is attractive and most attractive. You look at the valuations in the stock market right now. I'd say that they're pretty generous. I'd say it's a pretty attractive time to go public, and I think that is why, more than anything, we're seeing perhaps the three biggest IPOs of all time are going to happen right in a cluster when you talk about anthropic Open AI and also SpaceX. I think that speaks more to what is going on. The market is a very favorable time to go public. It is smart to take the most money that you can when it is available. When we had 0% interest rates, it was smart to borrow money because there's really no there's no interest payment involved. Why wouldn't you borrow? Taking money when it is very attractive is smart. I think that is more the motivation for going public right now, rather than where are we going to get the money to pay? I think that financially, they're in better shape than it's not a desperation move. It's a “this is a really good time to do it” move.

Tyler Crowe: To that, we're talking about the IPOs. I think within the past 48 hours, I have seen news articles or headlines basically going from “the SpaceX IPO is two times oversubscribed,” which means there's twice as much demand as the shares that should be going available. Then I think it was 24 hours later, “It was four times oversubscribed.” Who knows how true those are? It might be just a little bit of a leak to drum up interest in the IPO. It's hard to necessarily confirm that. But I've got to imagine this is we're recording this on Thursday. SpaceX goes public tomorrow. I'm sure we're going to see a couple more with basically this rapid demand for these IPOs. I would not be too, too shocked if we saw something similar with the OpenAI and the Anthropic IPOs in the coming months, but I think a lot of it might depend on what we see with this upcoming one.

Now, we've done a lot of discussion on the big companies, AI capex spending, who's going to be spending it. Coming up after the break, we want to dig down into some of the nooks and the crannies of who's making the money in these areas. What are some of the bottlenecks, and maybe some of the smaller companies that people might not be paying attention to?

As is the case with just about any investment trends, there are some of the obvious winners. We were talking about SpaceX. We were talking about Oracle, some of the big hyperscalers we did in the previous segment. But with every industry like this, there's always the hidden winners. You dive deep down into the various parts of the supply chain, and you can find bottlenecks and constraints. Companies that tend to, like, dominate small niche parts of their industry most people may not be thinking about, but can be incredible wealth creators for a lot of investors.

Guys, we've been talking about AI infrastructure build-out. I've lost count of how many times over the past six, eight months here doing this podcast. What I want you guys to do is instead of thinking about the big companies here, think about the bottlenecks. What are some of the constraints that you have been seeing as the AI infrastructure gets built out? What are some of the opportunities? Because I know that when people are listening to this podcast, it is obviously investing. It's stock picking. Where are you seeing some bottlenecks, unique industry perspectives and perhaps some companies? Jon, when you pitched this to me, you said chip production and the real deep-cut parts of the industry.

Jon Quast: I'm looking definitely at the fact that chip production is increasingly a national security issue, and there's a big push to bring all that production domestically. Not to mention that there are more chips needed just in a general sense. We're seeing all of these companies projecting, we're going to build this, we're going to increase this production, that production. Talk about Tesla's Tarafab, we can mock it a little bit, but they're saying because they're saying they want it to be the biggest facility on Earth, essentially. But is it going to be probably a big facility? Yeah, I'd say so. Is it going to pump out a lot of chips? Definitely.

What is interesting to me about that is perhaps the margins for the chipmakers could go down, but I think that it creates an opportunity and it is creating an opportunity for a company such as PDF Solutions. That's Ticker PDFs. This is not PDF from Adobe, the portable document file. This is process diagnostic framework. This company, essentially what it does is it is looking for defects on the chips. Then as it detects them, coming up with a way that we can now fix a process so that we don't produce a ton of chips that have the same defect. The value proposition here for the chipmakers is as these chips become more complex, more expensive to make, now it makes more and more sense to have a company like PDF Solutions coming in and finding the flaws and so that the processes can be fixed as they go. This is creating an incredible business opportunity for PDF Solutions. Revenue has more than doubled over the last five years.

One of the things I like about it here is that this isn't a recent all-of-a-sudden skyrocket. This is more of a steady lineup to the right for this company. The margin profile is improving as it scales, and so you look at it 40 times forward earnings. That looks expensive, but at the same time, I believe its opportunity is only getting bigger, and I believe that its margin inflection is just now starting. Maybe not as expensive as it seems at first glance.

Tyler Crowe: I want to ask a question about this because I think there's actually this interesting little fiefdom in the semiconductor industry, where I think of the suppliers ASML Holdings. People have heard of this. This is the one that makes those lithographic machines. They basically have a monopoly on it, and there's other like, random processes within the chipmaking process, like that there's either one company that makes 80% of them or there's two companies, and they're always fighting like 40, 60%, I think of like KLA Corp and Lam Research. When, for PDF Solutions, are they a dominant market player in their respective field, or is this one of the more fragmented parts of that industry?

Jon Quast: I would say that there are more dominant players than PDF Solutions, and there's a lot of sometimes overlap between companies. One company might have a broader portfolio. One might have so I mean, not always are they directly competing on all aspects with its competitor, sometimes just in one area. There are many companies out there doing I don't know if many is the right word, but there are multiple out there. I'm not necessarily saying PDF Solutions is screaming by. Definitely one in this area, I would say this area is one that is definitely a fertile hunting ground for potential opportunities because you look at the chipmakers, maybe the margins do pull back at that level, but it makes sense that more and more this company is going to be in hot demand. That's where I'm looking for opportunities.

Tyler Crowe: Matt, you really whetted my appetite because the pitch that you had said it was energy. Then I saw a little bit of your notes. I was like, Well, this is a very interesting take on energy. What have you got?

Matt Frankel: Jon's absolutely right that the chipmaking is a big constraint when it comes to building out AI infrastructure. That's why Micron hit $1 trillion market cap recently, which was not on my bingo card for 2026. But all the chips in the world it doesn't matter if you can't power them. I'm closely watching the energy bottleneck. Data center projects are being delayed left and right, and power constraints are the main reason for that. It's not likely to become any less of a problem in 2027 and beyond. Companies getting ahead of it and actively working to solve the power problem could be in a great position.

Having said that, a lot of energy sector companies, as you know, are very richly valued or are speculative in nature. I'm thinking this small nuclear start-ups, for example. One company that is a hidden player in this is Prologis. It's not a hidden company. Prologis is Ticker symbol PLD. They're the largest real estate owner in, I think, the world. They've been quietly getting into the data center space with a particular focus on power capacity. They explicitly state in their proxy filing that power availability remains a key constraint, and securing capacity gives them a meaningful advantage over their peers. They have long-established relationships with the utility companies. In some of their markets, they are the No. 1 customer to big established utilities, and that's a tough relationship to replicate. They're increasingly looking at onsite power generation rather than waiting for utility upgrades, gas turbines, fuel cells, solar, nuclear options, battery storage. They've already deployed over 1 gigawatt of installed battery storage, solar and battery storage capacity across their data center portfolio. The sites with secured power capacity right now for data center development are trading at, they're selling for 5-10 times, just conventional industrial land, and it's because of the power constraint problem. They have 3,000 development-ready acres in their portfolio right now, and it's a real big competitive advantage that's being underappreciated.

Tyler Crowe: This might be a little bit more of a challenging one, but one of the things we're also seeing, too, is not just access to power, but also access to water. That's a little bit more of a tough nut to crack here. Does Prologis have similar relationships with water utilities that they do with the powers that this shouldn't be a problem?

Matt Frankel: They do. Most of that land I mentioned, it's located near water sources. Their lands concentrated in coastal areas. The Northern Virginia Data Center market they actually have a pretty substantial presence there. But no, water capacity is a different nut to crack, and I wonder if after there are more solutions in place for the energy problem, which is honestly the bigger of the two right now. I'm wondering if water isn't going to be one that we're talking about on this show in six months.

Tyler Crowe: We've said it on the shows before. It seems to be like the supply chain or bottleneck whack-a-mole of, this is the problem now. Before next time, it's going to be insurance or some, like, weird switchboard, a piece of equipment that nobody else can find. When the numbers that we see for this industry is getting put up there, Oracle's like, we're going to do 20 more. Google or Alphabet says, we're gonna do 25 more, just because stuff costs more, not because we're building more. You see things like this. These infrastructure bottlenecks, these constraint companies, these ones that basically hold the keys to the kingdom here are going to be increasingly important probably going to be able to exert an immense amount of pricing power. Maybe this will be a nice little recurring segment that we do as we think about this going forward.

Coming up next, we're gonna hit the mailbag. Everyone, just a quick reminder. If you want to get your questions in and have us answer them on air, email us at podcasts at fool.com. That's podcasts with an ‘s’ at fool.com. All three rules as always: Keep it Foolish. Keep it short enough, I can read on air. Don't try to avoid anything that involves personalized advice. We have to try to keep things relatively generic.

This week’s first one comes in from Neil, which, based on the question, I think he's based in Europe. Here's the question. I was fascinated by your episode about European stocks and was baffled as to the huge difference in valuations on the Nasdaq, New York Stock Exchange, basically all the American exchanges, compared to other similar components in the U.K. and Europe. There was a very long list of companies he was giving examples to, but I want to condense it down to a couple of the big ones here. For example, Danish wind farm engineer Vs WindSim, one of the largest in the world. I think it's basically a duopoly with them and GE Vernova and Danish semiconductor manufacturer supplier, which is ASML Holding, mentioned it earlier. Excuse me, Dutch, not Danish. Again, this is a problem that we have, a European company. Stocks barely know where the countries are. His argument is basically they would be worth a lot more if they were given standing in the American market. ASML, maybe, it does have an ADR. It does trade for 50 times earnings. Well, I might pump the brakes on that one. But the rest of the question is, is this a case of American companies getting more news coverage in the States, stock trading platforms being not offering company or foreign-based stocks? Why such the large discrepancy?

This is something that's been going on for a long time, basically, the last time that international stocks outperformed American stocks was during the dotcom crash, all the way to about 2007 that slight recession that we had in the 2003, 2004 period was the last time we saw actual international outperformance. What is the big discrepancy do you guys see today?

Matt Frankel: First of all, it's not just Europe. Foreign stocks, in general, trade for a significant discount to U.S. companies as a whole. Just as an example, most listeners know that I'm the dividend stock guy in a lot of ways. A big part of my strategy, the average international large-cap dividend stock right now trades for 14 times earnings and 1.7 times book value. For the average U.S. stock in that same category, it trades for 22 times earnings and 3.1 times book. It's a pretty big gap. I don't know if it's just a case of them not being listed on U.S. markets. We're just the AI tailwinds are generally U.S.-based and have the U.S. market trading at premium valuations.

Tyler Crowe: Look, we can probably go into four or five other reasons, but I think one of the more underappreciated aspects of it is that there is no single European stock exchange. They all tend to be fragmented across a bunch of different ones. Basically, every country has their own, which makes the pools of capital a little bit smaller because people tend to invest in their own markets. Things like that can go to pricing discrepancy. I know certainly I probably would be more active on a, looking at European stocks, if there was just a single European stock exchange because I know there's companies, Swedish companies, Polish companies. I start going across the list, and I have to go to different exchanges, and when I go to buy them, it's harder depending on the country and whether or not there's, like, some sort of agreement with the account that I happen to have, which is Fidelity. It's a bunch of things just compounded over time.

Now, to satisfy Neil's question a little bit, I want you guys to think about maybe a company that you really like that you have been following for a while that isn't traded on the U.S. exchanges. Jon, is there anything like, are you a European, or is there some other parts of the market that you really find intriguing that aren't necessarily on the U.S. exchange?

Jon Quast: Well, I mean, Tyler, this is admittedly not my cup of tea. If you look at my portfolio, it's 100% U.S. listed stocks. This isn't something that I normally play in. I will say that as an ‘80s kid and me who grew up with Ninja Turtles, Japan has always been interesting to me, and there are some Japanese companies that actually have crossed my radar. This isn't necessarily anything that I've followed for a long time, but they've crossed my radar recently that I find very intriguing. The first one that I would put here is the company Nitto Boseki or Nittobo. This is a company that makes pretty much all of the world's T-glass and this is a substrate in making AI chips. There are some other companies that are starting to get into the game here because it is such a high demand and there is so little of it compared to how much demand there is. We'll see what that does to the economics, but so far, it's really interesting to Nittobo and how it's locked up customers for multiple years and how it is the one company making this material.

The other thing that has crossed my radar more recently is a company called Ajinomoto. It makes this film. It's a buildup film, ABF, Ajinomoto buildup film. Essentially, this is some insulating material that goes on GPUs and CPUs. Personally, I'm of the opinion that CPU demand is going to be very strong over the next several years due to agentic AI. I think that well, I am starting to position my portfolio accordingly. I think that does create a situation where Ajinomoto material is going to be in higher demand. Now, there are companies looking to diversify away from that, use other materials, so that is a key risk here, but these are two companies that have crossed my radar. I'm going to refrain from giving. They do have OTC over-the-counter ticker symbols. They're very thinly traded, so I'm going to refrain from giving those here, but listen on the Japanese exchange.

Tyler Crowe: It's a nice job, too, tying in together the bottlenecks and supply chain constraints that we have with AI build-out because those two clearly fall into that realm. I'll give mine really quick, and then, Matt, we’ll finish with you. I want to mention Exor NV. This is a portfolio company. It's basically the wealth of the Agnelli family. They're very powerful rich family in Italy. They own a portfolio. It's basically like they own Stellantis, Ferrari, CNH Industrial. They're a significant investor in Phillips, the healthcare company, several wholly owned subsidiaries, it owns The Economist newspaper, for example, and it's a slightly strange company because of the way it reports earnings because it's a holding company of a lot of publicly traded companies. I don't know, I feel like we've mentioned a couple of large companies that own publicly traded stocks before. The fascinating thing to me is this company trades for about 0.4 times book value. Trading for a significant value for its underlying portfolio. Trades on the Amsterdam Exchange, but in the U.S., it does trade over the counter as EXXRF, and there's enough trading that I don't feel like we're going to move the market here. I thought I would mention that one. Matt, what have you got?

Matt Frankel: I'm going to halfway dodge your question. There are a few on my radar, but instead of buying any of them directly, I prefer the ETF approach in my portfolio, and I'm sure a lot of listeners will feel the same way when it comes to international stocks. I own the Vanguard International High Dividend ETF ticker symbol, VYMI. It owns shares of over 1,500 dividend payers, mostly large caps all based outside the US. Some are listed on major U.S. exchanges, like Toyota is one of their top holdings. You'll also find some of my favorites, all those Japanese conglomerates that Berkshire Hathaway can't get enough of, are among the top holdings of this one. It has a fantastic yield. It's got a cheap valuation. I mentioned some of the multiples that international dividend stocks are trading for, and it could be a really excellent hedge against an expensive U.S. stock market right now.

Tyler Crowe: All the times that international stocks have outperformed U.S. stocks, it tends to be at times when it's either one, really high inflation, or coming down from a major asset bubble. I'm not making any predictions. I'm just throwing those two kind of factoids out there for everyone to consider.

As always, people on the program may have interest in the stocks they talk about and The Motley may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, check out our show up. Thanks for producer Dan Boyd and the rest of The Motley Fool team. Jon, Matt, and myself, thanks for listening, and we'll chat again soon.

Jon Quast has no position in any of the stocks mentioned. Matt Frankel, CFP® has positions in Berkshire Hathaway, Oracle, Prologis, and Vanguard International High Dividend Yield ETF. Tyler Crowe has positions in Berkshire Hathaway and Prologis. The Motley Fool has positions in and recommends ASML, Alphabet, Berkshire Hathaway, Ferrari, GE Vernova, KLA, Lam Research, Micron Technology, Oracle, Prologis, and Tesla. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.