SPX: S&P 500 Snaps Win Run on Report Saying AI Profits May Not Be Great — Or Exist at All

Oracle was leading the stumble after a paper said that the tech veteran’s AI services to OpenAI are churning out tiny profits.

💥 S&P 500 Breaks Winning Streak

• The S&P 500 index (SPX) moved lower Tuesday, snapping a bullish streak of more than a week. A day after it settled at its 32nd record of the year, the broad-based index gave back 0.4% on the day.
• Losses were widespread. The same AI winds that fueled the record-setting run toppled the market yesterday with the Nasdaq Composite IXIC washing out 0.7%, also moving away from a record high.
• The Dow Jones Industrial Average DJI was less affected, largely because it holds mostly real-economy companies and is somewhat spared from the punishing AI-driven pullbacks. Futures contracts tied to the major averages were flat to slightly positive ahead of the bell Wednesday.

🚨 Oracle’s Big AI Losses

• So what happened? A report came out, which said that renting out AI servers might not be that profitable. Or worse — lead straight to losses. We’re talking here just about renting, not about building out the infrastructure in-house or training LLMs.
• Business publication The Information released a story that described how bad the situation is for Oracle ORCL. It’s based on internal data, which shows how tough it actually is to turn a profit from huge multi-billion dollar deals.
• “In the three months that ended in August, Oracle lost nearly $100 million from rentals of Nvidia’s Blackwell chips, which arrived this year,” the report said. Oracle fell more than 7% on the news, but later pared back most of it to clock out with a 2.5% drop.

🔥 Look Across the Board

• Adjacent AI plays nosedived, too. CoreWeave CRWV, whose sole mission is to rent out AI servers, logged a 3.8% decline. Google parent Alphabet GOOGL wiped out 1.9%. Every member of the Magnificent Seven fell with the exception of Amazon AMZN. But for various reasons.
• Tesla TSLA drifted lower by 4.5% after the EV maker unveiled two lower-cost variants priced under $40,000. New versions of Model 3 and Model Y are expected to boost sales at a time when competition is red-hot and only getting stronger.
• In the meantime, the US government shutdown enters its eighth day and the nonfarm payrolls report might still not see daylight again (scheduled for release Friday). The uncertainty propelled gold XAUUSD above $4,000 for the first time ever as traders sought to de-dollarize their portfolio.