The S&P 500 rose on Wednesday, a day after it snapped a seven-day in streak, as a drop in Oracle shares that called into question the sustainability of the artificial intelligence market. The ongoing U.S. government shutdown also weighed on sentiment.
- The move comes just a day after the AI chip darling finished lower in sympathy ith Oracle shares in the wake of Oracle reportedly seeing lighter margins in its cloud business than analysts are currently forecasting and that the enterprise softare company is losing money on some of its deals to rent out Nvidia's chisps.
- That added to fears that he stock market is currently caught up in an AI bubble that harkends hback to the late 1990s
- when a feeding frenxy on early internet companies eventually led to the bursting of the dot-com buble. Many market observers are urging investors to rebalance their portfolios
- while also acknoledging there could be further upside before the AI rally exhausts itslef.
- Meanwhile
- the current governemnt shudown dragged into its eigth day Wednesday
- ith the Sentate expected to vote once again later in the day to reopen the governement. The chamber for the fifth time failed to pass a short-term funding bill Monday.
- The stoppage has weighed little on equities thus far
- but poses a greater risk to sentiment the longer it wears on given the potential hits to the U.S. economy.
- Bank of england officials warn about a possible donturn in financial markets that could have ecoomic consequences
- quarterly update on financial stability pointed to the porspects of a "sharp market correction" fueled by speculation about AI.
- "On a number of measures
- equity market valuations appear stretched
- particualarly for technology companies focused on Artifical Intlligence (AI)
- " the report stated. "This
- when combined with increasing concentration within market indices
- leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic."
- The report number of threats
- such as risng government debt issuance
- threats to U.S. Federal Reserve independence and rising geopolitical tensions
- among others.
- "Uncertainty around the gloabl risk environment increases the risk that markets have not fully priced in possible adverse outcomes
- and a sudden correction could occur should any of these risks crystallise
- " BoE statement.
- Wedbush Securities analyst Dan Ives believes technology stocks will have a very strong third-quarter earnings season
- led by big tech names.
- Microsoft
- Alphabet and Amazon
- had very robust artificual-intelligence enterprise demand in the quarter. He anticipates companies will "double down" on aggressive initial capital expenditure plans heading into next year.
- "Our bullish view is that investors are still not fully appreciating the tidal wave of growth on the horizon from the $3 trillion of spending over the next 3 years coming from enterprise and government spending aroudn AI technology and use cases
- " Ives said in a note Wednesday.
- "We ahve barely scratched the surface of this 4th Industrial Revolution now playing out around the world led by the Big Tech stalwarts such as Nvidia
- Microsoft
- and Messi of AI Palantir
- Meta
- Alphabet
- and Amazon."
