If there were ever an “I told you so!” moment for a generation of kids whose parents said they were “wasting their money” on “Pokemon” cards, that moment is here: not only are the trading cards outperforming the S&P 500, but also tech stocks like Meta, and by a huge margin. The cards are also charging up GameStop’s shares, as the meme stock powered up its collectible business by leaning into “Pokemon” nostalgia. The S&P 500 notched another record close yesterday. Eighty-three basis points of yesterday’s return in the SPDR S&P 500 ETF, more than 2x its daily gain, were attributable to Oracle and the two leading US chip designers, Nvidia and Broadcom. Tech, utilities, and energy were the top-performing S&P 500 sector ETFs, while consumer staples and healthcare were laggards. |
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Oracle finished Wednesday up 36% after the company forecast that it expects its cloud infrastructure business to see revenues climb to $144 billion by 2030. As hockey-stick revenue projections go, that’s about as bold as they come in terms of sheer scale. Not a household name like Google, Apple, or Amazon, Oracle has a swath of different specialties, providing software, servers, and cloud services to global businesses. |
- The insane revenue backlog that Oracle revealed, which was up 359% to $455 billion, was enough to lift the entire AI space.
- That figure is a closely followed measure of the company’s “booked” revenue, known as “remaining performance obligations,” or RPO. Essentially, it’s legally binding IOUs that reflect sales Oracle expects to go through.
- OpenAI reportedly signed a massive five-year deal to purchase $300 billion worth of cloud computing capacity from Oracle, which The Wall Street Journal noted would be one of the largest cloud computing contracts ever signed, requiring 4.5 gigawatts of capacity.
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Most of Oracle’s RPO won’t turn into real revenue for quite a bit. In its annual report in June, the company said two-thirds of its then $137.8 billion RPO wouldn’t be recognized as revenue for at least 12 months. |
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The entire AI trade was uplifted on Oracle’s good fortune, and that makes sense. In a way, this is just the first of many times we’ll be seeing these dollars in the years to come. First they’ll go from OpenAI to Oracle, and then into the rest of the AI business. Oracle also has to build out its infrastructure to meet that contracted demand, and that race is reflected in the hefty $35 billion in capital spending it’s allocated for this fiscal year. Oracle’s CEO said she expects RPO to grow to more than $500 billion in the fiscal year as the company signs more multibillion-dollar cloud deals. |
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- The latest update from the US Census Bureau’s Business Trends and Outlook Survey of 1.2 million firms suggests that large companies, having experimented with the tools over the last year, might be starting to touch the brakes on using AI.
- A trend highlighted by Apollo’s chief economist, Torsten Sløk, shows that as of the second and third week of August, AI adoption in businesses with more than 250 employees had dropped to 9% from a 15% peak in the first two weeks of June.
- Only 14% of the companies surveyed in the same period in August expected to use AI in their businesses in the next six months, down from 19% in June.
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There could be some seasonal effects at play, but given how much is riding on the AI boom, that feels like a significant data point that runs contradictory to the continued AI enthusiasm, and wouldn’t yet show up in the earnings of major AI enablers like Nvidia and Broadcom. |
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