Futures linked to the DOW JONES index rose 0.24% to 46,700.00 points, while those of the S&P 500 advanced 0.12%, to 6,722.60 points. NASDAQ 100 futures advance 0.10% to 24,864.40 points.
Wall Street is coming off a negative day yesterday, Tuesday, with the DOW JONES losing 0.20%, compared to the 0.38% that the S&P 500 lost and the 0.67% that the Nasdaq lost.
Much of the blame for the falls came from the values linked to artificial intelligence, after the newspaper The Information reported that Oracle’s margins in its cloud business are lower than analyst forecasts, and that the enterprise software company is losing money on some of its NVIDIA chip rental deals. This information reinforces fears that the stock market is trapped in an AI bubble that brings back memories of the late 1990s, when the frenzy of early internet companies eventually led to the bursting of the dotcom bubble.
Peter Oppenheimer, Goldman Sachs strategist, believes that we cannot yet speak of a bubble. In his opinion, there are elements “that coincide with previous bubbles, such as the increase in absolute valuations, high market concentration, the greater capital intensity of leading companies and the emergence of supplier financing.”
However, «we see key differences: First, the appreciation of the technology sector has so far been driven by fundamental growth, rather than irrational speculation about future growth. Second, the leading companies that have achieved the highest returns have unusually strong balance sheets. Third, the AI sector has, until now, been dominated by a few established companies; most bubbles form in a period of heightened competition, as both investors and new entrants flock to the market.”
“While it appears that we are not yet in a bubble, high levels of market concentration and increased competition in the AI sector suggest that investors should continue to focus on diversification,” Oppenheimer concludes.
On the other hand, The closure of the US Administration now extends for the seventh day. The stoppage has had little effect on equities so far, but as it continues it represents a greater risk to confidence. In addition, it has paralyzed the publication of statistics such as the employment report that are key for the Fed meeting at the end of the month.
Today at least Investors will be able to count on the minutes of the September meeting looking for additional clues on future monetary policy moves. At this meeting, the Fed lowered interest rates by 25 percentage points, its first cut so far this year.
Watch out for Oracle, NVIDIA, FedEx and more
On a business level, investors will have to remain attentive to the price of the aforementioned Oracle, which has accumulated falls in 9 of the last 11 trading days.
We will also have to pay attention to the price of NVIDIA after learning of an agreement with xAI, Elon Musk’s startup. The financing plan will consist of purchasing Nvidia chips and renting them to the AI startup for use in its upcoming Colossus 2 data center megaproject in Memphis, according to Bloomberg. Nvidia has committed to investing up to $2 billion in the equity portion of the deal.
FedEx fell 2% in New York morning after a filing with the SEC showed that Prime Capital Investment has sold 4,610 shares of the courier service, reducing its holdings.
Joby Aviation plummets 11% on the stock market after announcing a capital increase. The manufacturer of electric vertical takeoff and landing vehicles will sell 30,500,000 shares at $16.85 each. This translates to gross revenue of approximately $513.9 million. The company plans to use these proceeds to fund business operations, certification and manufacturing initiatives, and other corporate purposes. Joby is preparing to launch its air taxi service in the United States next year.
Rocket Lab shares rise more than 5% in New York morning after the space company announced the signing of a multi-launch agreement with the Institute for Q-shu Space Pioneers (iQPS)a Japanese terrestrial imaging company. The contract includes three dedicated launch missions with its Electron rocket, which will take place no earlier than 2026 from its Launch Complex 1 in New Zealand. This brings the total number of upcoming releases with iQPS to seven.
AST SpceMobile has announced an agreement with Verizon to offer its mobile service from space starting next year. The company will offer its service to mobile users with Verizon plans. This marks the expansion of the collaboration between both companies announced last year. AST shares are up more than 8% pre-market on Wednesday. Verizon shares advance 0.8%.
In commodity markets, oil prices are rising as investors dismiss fears of oversupply after coming to terms with OPEC+’s earlier decision to curb production growth next month. US West Texas futures rose 1.18% to $62.46 per barrel, while international benchmark Brent oil rose 1.04% to $66.13.
Meanwhile, Gold continues to skyrocket to all-time highs above $4,000 per ounce, encouraged by the search for safe assets in the face of growing economic and geopolitical uncertainty, along with expectations of further interest rate cuts by the Federal Reserve. The yellow metal rises 1.38% to $4,038.73 per ounce.
The euro fell 0.27% against the dollar, leaving the exchange rate at 1.1626 dollars for each single currency.