 |
|
|
|||||
Even if you only pay a little attention to the business world, its been hard to miss Oracles phenomenal week. The companys shares jumped nearly 40% on Wednesday, and CEO Larry Ellison briefly overtook Elon Musk as the worlds richest person (hes now essentially tied). Oracle also signed a staggering $300 billion deal with OpenAI for computing power over the next five years. Even in the fast-moving world of AI, thats a lot in a short time. Investors cheered, but some Wall Street bulls are wondering if this is further inflating the AI bubbleand making a potential collapse all the more alarming. Oracle’s rocket ride Oracle shares spiked after the company reported fiscal first-quarter earnings Tuesday afternoon. It missed analyst expectations on earnings per share and revenue, but investors looked past that shortfall, thanks to booming cloud demand. Oracle said it has $455 billion in remaining performance obligations (that is, contracted revenue that has not yet been recognized), up 359% from a year ago. Wall Street was expecting that number to be closer to $180 billion. By Wednesday, The Wall Street Journal reported the OpenAI deal, one of the largest cloud contracts ever signed. (It will require about as much power as 4 million homes.) The one-two punch gave Ellison the largest single-day jump in net worth ever recorded by Bloomberg, which tracks billionaire holdings. Oracle’s rocket ride is not unlike the one Nvidia found itself on beginning in 2023 (a ride that is still going strong). But the high level of the stock is giving some observersand some insiderspause. Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,” said Open AI founder Sam Altman last month. “Is AI the most important thing to happen in a very long time? My opinion is also yes. Oracle shares were trading at nearly 50 times the companys 12-month forward earnings on Wednesday. (The stock was down 5% in midday trading Thursday, to $311, but remains well above pre-earnings levels.) Thats the highest multiple since the dot-com crash (when the forward projected earnings hit 120). Still, Oracle has some solid footing. Its expected cloud revenue and the OpenAI deal do give those stock escalations some footing. Investors are betting on informed company forecasts rather than blind hope. Nvidia, meanwhile, has seen share prices jump 390% in the past two years and double since April. It has a market cap of $4.3 trillion, but is heavily reliant on two unknown customers who made up 39% of its Q2 revenuea red flag for the bulls. An AI bubble? Talk of an AI bubble didnt start this week, of course. Some analysts have been sounding alarms for months. In July, Torsten Slok, chief economist at Apollo Global Management, warned that AI stocks are even more overvalued than dot-com stocks were in 1999, putting the market at serious risk. The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s, he wrote in a note to investors. Put another way: Investors are betting so heavily on AI that the stock price of companies like Nvidia, Microsoft, Apple, and others has become detached from their earnings. Slok isnt alone. Alibaba Group chair Joe Tsai has warned that U.S. AI stocks are in a bubble; longtime tech executive (and former C3.ai CEO) Tom Siebel did too. Part of what has them so nervous is the fact that the top five companies in the S&P 500 now hold 30% of the indexs wealth. Thats a higher share than during the dot-com era and well above the Nifty Fifty that dominated markets in the 1970s. That concentration doesn’t clearly identify a bubble, but it does underline how dependent the market is on just a few companies that are all part of the same industry. If something goes wrong in AI, the ripple effects could be disastrous for the market.
Category:
E-Commerce
Tariffs aren’t just bad for business and consumers: They will also increase the number of Americans living in poverty, according to new research. An analysis out this week from The Budget Lab at Yale University found the Trump administration’s new 2025 tariff hikes will increase the number of Americans living in poverty by somewhere between 650,000 and 875,000 in 2026that’s 0.2% to 0.3% of the U.S. populationincluding some 150,000 to 375,000 children. “Because tariffs directly reduce the purchasing power of low-income households (either by decreasing nominal incomes or by increasing prices), they also affect poverty,” the report said. Yale researchers used the Official Poverty Measure, a standard metric for calculating poverty based on pre-tax income, and the Supplemental Poverty Measure, a more comprehensive measure which takes into account more information on household resources and the cost of living. They used data from the U.S. Census Bureau. You can think of tariffs as indirect taxes, which increase prices, thereby decreasing the purchasing power and income of American households. That’s because tariff costs are often passed from businesses onto consumers. In fact, U.S. consumers absorbed 22% of tariff costs through June, and that number is expected to rise to 67% by October, according to an analysis from Goldman Sachs, CNN reported. When Americans lose purchasing power (meaning they are not able to buy as much with the same income), households with the lowest income feel the most burden, and more end up falling below the poverty threshold. Lower-income families often use a bigger chunk of their earnings on living expenses than wealthier ones, making them more vulnerable to price shifts, CNN noted. On Tuesday, the Supreme Court agreed to hear arguments on whether Trump’s sweeping global tariffs are legal. The Budget Lab estimated consumers face an overall average effective tariff rate of 18.6%, the highest since 1933.
Category:
E-Commerce
A battery plant co-owned by Hyundai Motor is facing a minimum delay of two to three months following an immigration raid last week, Hyundai’s CEO Jose Munoz said Thursday. The Georgia plant, which is operated through a joint-venture between Hyundai and South Korea’s LG Energy Solution, was at the center of the largest single-site enforcement operation in the U.S. Department of Homeland Security’s history. Munoz, in his first public comments since the raid, said he was surprised when he heard the news and immediately inquired if Hyundai workers were involved. He said the company discovered that the workers at the center of the raid were mainly employed by suppliers of LG. It is typical for an automotive battery plant to employ these workers as it’s getting off the ground, Munoz said. For the construction phase of the plants, you need to get specialized people. There are a lot of skills and equipment that you cannot find in the United States,” Munoz said, on the sidelines of an automotive event in Detroit. Nora Eckert, Reuters
Category:
E-Commerce
All news |
||||||||||||||||||
|
||||||||||||||||||