If the S&P 500 gains another 5% from here until December 31, it will exceed every single Wall Street price target for the 3rd consecutive year.
$SPX Source: Charlie Bilello
Oracle $ORCL was the market mover yesterday, down -2.5% and driving Tech stocks, the S&P500 and cryptos lower. So what happened?
A month ago Oracle stock soared after forecasting extraordinary growth: "We signed four multi-billion-dollar contracts with three different customers in Q1," said Oracle CEO, Safra Catz. $455B in contract backlog. Multi-billion-dollar deals. But according to The Information, newly surfaced internal documents paint a very different picture. Oracle’s AI cloud margins are razor-thin around 14 cents of profit for every $1 in Nvidia server rentals. That’s less than most retail businesses, and in some cases, the company’s actually losing money. The data shows margins fluctuating between 10% and 20%, averaging just 16%. And reportedly, Oracle lost nearly $100 million last quarter renting out Blackwell chips, the very product driving its “AI boom.” The first crack in the matrix? Not really. This looks more like margin issue rather than a demand issue. Basically, this is not about Oracle not finding customers for renting their GPUs but customers asking for good deal or they go elsewhere. As a result, Oracle margins have not been that strong. Source: STockMarket.news
Semiconductors SOX's relative performance to the equal-weighted S&P 500 is nearing the highest levels since the dot-com bubble...
Source: zerohedge
Oracle’s debt-to-equity ratio is ~520%, way above other AI stocks
E.g Amazon is near 50%. Microsoft close to 30%. Google’s even lower. How long can Oracle afford to keep this up? Source: StockMarket.news
The circular AI economy...
$AMD giving OpenAI 10% of its stock (worth roughly $35bn pre-market) so OpenAI can buy 6 GW of AMD chips over the next few years. Stock up +27%. Source: Wasteland Capital @ecommerceshares
How much of the S&P 500 is AI related stocks?
JP Morgan has identified 41 "AI-Related" stocks. As this chart shows, they are now 45% of the S&P 500. Source: Bianco Research
The S&P 500 is up more than 100% since 2020
But the index is actually down 88% when priced in a hard asset like bitcoin. Source: Anthony Pompliano 🌪@APompliano (H/t @philrosenn)
It's liquidity stupid!
Strong M2 growth in China, and to a smaller extent Brazil and India, add to the ongoing expansion of M2 in the United States and in Europe. Our Global M2 proxy continues to point to a broadly supportive liquidity environment for risk assets. The S&P 500 continues to follow the evolution of our Global M2 proxy with an 11-week lag. Bitcoin has desynchronized from our Global M2 proxy since mid-August but bounced up strongly last week. Will it catch up our Global M2 proxy (and rise toward 140k)? NB: liquidity is one risk assets driver among others. Past results do not guarantee future results
