Oracle’s earnings report, released after market close, is drawing significant attention as a bellwether for the artificial intelligence sector. The technology company provides enterprise information technology solutions. Investors are assessing whether current AI investments are sustainable amid concerns about high capital expenditure and potentially circular revenue arrangements within the industry.
Citigroup Inc.’s trading strategy desk suggests that traders are placing greater emphasis on Oracle’s earnings than on recent Federal Reserve decisions. According to Citi’s Vishal Vivek, the options-implied movement for the S&P 500 surrounding Oracle’s results, next week’s jobs data, and inflation report now exceeds that of today’s FOMC meeting. This underscores the perceived importance of Oracle’s financial performance in gauging the health of the AI market.
Vivek noted that Oracle has emerged as a critical benchmark for evaluating the risk of an AI capital expenditure bubble. The anticipation surrounding Oracle’s earnings mirrors the importance previously attached to Nvidia’s results, highlighting the growing scrutiny of AI-related investments. The company’s performance is now being seen as indicative of the broader AI landscape.
Despite some scepticism, options traders appear to believe that the rally in artificial intelligence stocks is likely to continue. Derivatives market data reveals that open interest in call options on the ‘Magnificent Seven’ tech stocks is near its highest level since March 2023 relative to put options, indicating that traders are positioning for further upward movement in these stocks.
