Want Some AI debt with your Oil Bill?

 

CLOSING BELL The market sold off Wednesday after CPI kept inflation pressure alive, oil stayed loud, and the AI trade remembered servers do not buy themselves. Inflation numbers were the highest in about three years, though month over month price climbs were not as bad as feared, 4.2% is a lot higher than the 2% goal.  The damage was concentrated in growth and AI, while crude climbed +2% and kept energy in the driver’s seat. Interest rate traders kept a December rate hike priced in after the CPI, especially after Friday’s strong labor report.  All anyone can think about is the massive IPO coming Friday, AI spending (or overspending) and the war. The U.S. retaliated to a shot down helicopter with waves of attacks, and pledged to continue them tonight.  Today's Briefing:  After The Bell: Oracle beat estimates, but investors focused on the cost of funding its AI cloud backlog  Stocktwits Events: Stocktoberfest heads to New York City this October  Stocks: Supermicro's $7B financing plan turned AI server demand into a dilution debate  Macro News: CPI, oil, and energy pressure gave the Fed another reason to sit still  Pops and Drops & More

AFTER THE BELL Oracle’s AI Bill Comes Due ☁️ Oracle’s numbers in a pretty dashboard  Oracle beat Q4 estimates, kept its revenue target intact, and raised its profit forecast. But it ain’t SpaceX, so the stock started to fall after hours because investors got the other side of the AI boom: who cares about just another giant’s financing plan. The RIP:  $ORCL ( ▼ 2.21% ) fell 2.21% in the regular session, then dropped about 4.8% after hours near $191.70. Fiscal Q4 EPS was $2.03 adjusted vs. $1.96 expected, revenue was $19.18B vs. $19.10B, and revenue grew 21% year over year. Cloud revenue rose 47% to $9.91B, while cloud infrastructure revenue jumped 93% to $5.8B.  The problem was not demand. Remaining performance obligations hit $638B, up 363%, ahead of the $595.67B StreetAccount estimate. That’s half a trillion dollars right there, and those numbers were unheard of twelve months ago. The problem was funding it.  Oracle said it expects to raise $40B through debt and equity financing, including a previously announced $20B share sale, after already raising $43B in debt and $5B in equity in fiscal 2026. Yikes.  That put the AI buildout back on trial. Oracle posted negative free cash flow of $23.7B for the year, depreciation nearly doubled to $7.62B, and capex surged 162% to $55.66B. Bulls can point to the backlog, cloud infrastructure growth, and OpenAI-linked demand. Bears can point to dilution, debt, and the question every AI infra name is facing: when does demand turn into durable free cash flow? Stocks was leaning extremely bullish into the print, with high message volume across roughly 63k watchers, but the setup was call-heavy and crowded before the after-hours reversal.  @JDKING said: “$ORCL Thumbs up if you’re holding through earnings and believe ORCL sees $250+ this week.”  @amitDBA said: “$ORCL call Premiums are very high for lotto play.”  @JOEYBUYDEN said: “$ORCL maybe they want us to save the market?”  Tell the $ORCL room: AI backlog or balance-sheet problem? → STOCKS Supermicro Turns Demand Into Dilution  Supermicro became the cleanest AI stress test on the board, after its post market dilution announcement on Tuesday. But hey, if you can’t beat ‘em, why not join ‘em?  The RIP:  $SMCI ( ▼ 27.98% ) fell -28% after announcing a proposed $7B financing plan for funding recent AI server orders. The company pointed to roughly $39B of AI server orders, but investors focused on the cost of chasing them. It wasn’t the only mover on the news. Meme stocks now have meme ETFs: $SMCZ ( ▲ 55.18% )  Defiance Short SMCI : ripped +56% $SMCX Defiance Long SMCI : collapsed -56%.  The demand sounds enormous, but the financing reminds investors that AI infrastructure is component-heavy, cash-hungry, and not always kind to existing shareholders. The Stocktwits community was bearish, with low message volume across roughly 88k watchers. Bulls called the raise growth capital for a huge order book, while bears said the move reopened trust issues around management and dilution.  @ultimategirl63 said: "$SMCI Wall Street panicking over a $7B dilution raise while ignoring the math." (post)  @Optee said: "$SMCI didn't raise capital because of liquidity problems." (post)  Tell the $SMCI room: demand or dilution →             MACRO NEWS Oil Prices Put Fed on Hold  The May inflation report gave the Fed one more reason to sit still next week. Energy did most of the damage, but the market’s problem is that headline inflation is moving the wrong way again. Outside of gas prices, there was not a ton of worry in the market that big bad inflation from Covid times was back.  "Today's CPI data confirmed our expectation that higher energy costs and their ripple effects on the costs of transportation and food would drive May headline CPI higher," Atsi Sheth, Moody's Ratings chief credit officer, said Wednesday. The RIP: CPI rose +4.2% year-over-year in May, up from +3.8% in April. Headline CPI rose +0.5%month-over-month. Core CPI rose +2.9% year-over-year and +0.2% monthly. Energy prices rose +3.9%and accounted for more than 60% of the monthly increase.  "I'm watching the data very carefully to make sure that the inflation that we've seen recently does not get embedded into higher, more persistent inflation," John Williams, New York Fed president, told Yahoo Finance last week. The contradiction is that core inflation gave doves something to like, but headline inflation gave the Fed no clean reason to help risk assets. The President, taking questions in the Oval Office, said he “loved inflation,” because the U.S. is taking oil barrels from Iran, and remarked that when the war ends it will all be great.              TRENDING ON STOCKS Pops & Drops $DUOL ( ▲ 3.45% )  Duolingo : climbed +4% after AI education names caught a bid  $NVDA ( ▼ 3.73% )  Nvidia: fell -4% after chip stocks extended their AI selloff  $DJT ( ▼ 4.53% )  Trump Media : slid -4% after Truth Social volatility returned with Iran headlines  $GLD ( ▼ 4.15% )  SPDR Gold Shares ⚡:fell -4% after gold sold off despite geopolitical tension  $ACHR ( ▼ 5.08% )  Archer : tumbled -5% after speculative growth names lost altitude again  $CAT ( ▼ 6.4% )  Caterpillar: tumbled -6%after Dow selling hit heavy machinery leaders  $NRG ( ▼ 7.16% )  NRG Energy: fell -7%after power stocks faded from recent highs  $INSM ( ▼ 7.23% )  Insmed: slid -7% after biotech risk appetite cooled sharply again  $GNRC ( ▼ 8.38% )  Generac: tanked -8%after generator stocks slipped from record highs  $CTRA ( ▼ 8.46% )  Coterra: dropped -8%after energy traders faded the gas rally

WHAT’S ON DECK Tomorrow’s Top Things

Macro: Producer Price Index (PPI) (8:30 AM ET), Weekly jobless claims (8:30 AM ET).

Pre-Market Earnings: $ACB Aurora Cannabis, $LOVE Lovesac Company.

After-Market Earnings: $ADBE Adobe Inc, $OLOX Olenox Industries Inc., $RH, $LEN Lennar A Corp Class A, $WTER Alkaline Water Company Inc (The).