Oracle (ORCL) shares shook the market due to soaring AI demand, inflation concerns and fluctuations

Key Highlights

• Continued inflation drives Fed interest rate hike expectations to 85%

• Crude oil prices fall sharply after soaring to $110

• Government bond yields approach key 5% threshold

• Oracle (ORCL) Stock prices climb due to a $664 billion backlog of artificial intelligence infrastructure orders

• Although results exceeded expectations, Adobe (ADBE) shares fell due to conservative prospects

Continuing inflation pushed the Federal Reserve's interest rate hike expectations to 85%

August inflation data showed that the U.S. economy continued to face pricing pressure. The consumer price index (CPI) rose 0.4% from July to an annualized rate of 3.4%.

Core CPI excluding volatile core food and energy components increased by 0.3% month-on-month. The reading exceeded economists 'forecasts.

Market participants immediately adjusted their interest rate expectations. Futures contracts show an 85% chance of the Federal Reserve raising interest rates at its September policy meeting.

High interest rates have increased corporate financing costs and put downward pressure on the valuation of growth stocks.

Crude oil prices fall sharply after soaring to US$110

Brent crude climbed to about US$110 a barrel during trading hours, setting its peak since May.

Subsequently, oil prices fell more than 3%, as reports emerged about potential diplomatic talks on regional shipping lanes.

Despite the intraday correction, Brent crude is still expected to achieve a weekly gain of more than 8%.

Due to multiple factors, supply constraints still exist. Production in Saudi Arabia is facing interruptions, tanker accidents are frequent, and key corridors such as the Strait of Hormuz and the Red Sea continue to face safety challenges.

High energy costs fuel inflation through transportation, fuel and production costs. This dynamic may prolong the duration of restrictive monetary policy.

Government bond yields approach key 5% threshold

Benchmark 10-year bond yields hit 4.99% at one point, reaching their strongest level in nearly three years, before falling back moderately to about 4.93%.

As yields approach 5%, fixed-income securities become increasingly attractive as an alternative to equity investment.

Rising yields raise financing costs across the economy, often putting the most pressure on technology companies and growth companies with premium valuations.

Huge fiscal deficits, increased bond supply, stubborn inflation and high energy prices have all contributed to the upward trend in yields.

Oracle's (ORCL) share price climbed on a $664 billion backlog of artificial intelligence infrastructure orders

Oracle became the day's brightest performer. Quarterly revenue surged 30% to $19.3 billion, exceeding analyst expectations.

The enterprise software giant secured more than $30 billion in new AI cloud deals during the quarter.

The total remaining performance obligations (representing future contract revenue streams) reached US$664 billion.

Free cash flow recorded a negative $5.4 billion. Although still negative, the data was much better than analysts 'expectations of minus $9.6 billion.

Oracle shares rose about 3% on Friday. The strong results eased investor concerns about the financial sustainability of huge data center infrastructure spending.

Although results exceeded expectations, Adobe's (ADBE) shares fell due to conservative prospects.

Adobe reported quarterly revenue of $6.76 billion and adjusted earnings per share of $6.13, both exceeding Wall Street consensus expectations.

Annual recurring revenue from Adobe's AI-driven product portfolio more than doubled compared to the same period last year.

Shares fell despite earnings exceeding expectations. The company's leadership provided fourth-quarter revenue forecast slightly below analyst estimates.

Market participants remain cautious about Adobe's long-term competitive position. Emerging platforms like Canva and Figma pose a growing challenge to its mature creative software business.

The contrasting performances of Oracle and Adobe illustrate a broader market model: Companies with clear AI infrastructure exposure are rewarded by investors, while companies facing competitive disruption face higher suspicion.