Oracle's blockbuster surge shows AI trade's growing influence on market

"When people were beginning to get a little bit concerned about the AI and its related infrastructure growth slowing down a bit, Oracle comes out with a number that just surprises everybody and fuels the fire of that whole subgroup," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "This is a sign of the overall AI trade once again getting in the driver's seat as far as equity markets are concerned."

Oracle is now one of Wall Street's 10 most valuable companies. Nearly all of these are viewed as leaders in AI, including Nvidia, Microsoft, Alphabet and Amazon.

AI chip heavyweight Nvidia this year became the world's most valuable company in history, displacing Microsoft and iPhone seller Apple, which many investors view as straggling in the race to dominate emerging AI technology.

Nvidia's stock price has dipped about 2% since it gave an uninspiring sales forecast on August 27, but its stock market value remained at $4.3 trillion as of Wednesday's close.

Meanwhile tech shares have steadied after wobbling last month when investors pointed to signs of emerging caution related to the AI trade. The technology sector is up more than 16% so far in 2025.

Oracle's $922 billion stock market value following Wednesday's surge was just behind Berkshire Hathaway's, $1.06 trillion, which trails Tesla's $1.12 trillion.

Oracle unveiled four multi-billion-dollar contracts on Tuesday, taking advantage of an industry-wide shift led by companies such as OpenAI and xAI, to aggressively spend to secure the massive computing capacity needed in the AI race.

The U.S. stock market's eight most valuable AI-related companies, including Oracle and chipmaker Broadcom, now make up almost 30% of the S&P 500.

AI-related companies also have been by far the largest contributors to the benchmark index's gains in recent months.

Gains in the shares of Nvidia, Microsoft, Broadcom, Meta Platforms, Alphabet, Amazon, Palantir Technologies and Oracle, together have accounted for around half of the S&P 500's 11% increase so far in 2025, according to a Reuters calculation of LSEG data.

Over the past five trading days, nine of Wall Street's 10 most traded companies have been related to AI, with Apple the exception. Nvidia leads the list, with an average of $29 billion worth of trades per day, according to LSEG data.

AI stock enthusiasm has spread beyond tech-related areas, boosting shares of utilities and power equipment companies that will need to feed the surging energy demand to fuel the technology.

Industrial firm GE Vernova and utilities sector members Constellation Energy and Vistra are among the non-tech stocks that have put up massive gains in the past year, helped by AI excitement.

The AI enthusiasm has helped drive the U.S. stock market's valuation well above historical levels. The S&P 500 is trading at over 22 times the expected earnings of its constituents, around its highest valuation in four years, according to LSEG Datastream. That compares to an average P/E of 18.6 for the past 10 years.

Tech -- which has by far the heaviest weighting in the S&P 500 of the 11 sectors -- has seen its forward P/E rise to over 28 times, versus its 10-year average of about 22, according to LSEG Datastream.

After Wednesday's surge, Oracle's stock has nearly doubled in price year-to-date, with other large tech stocks putting up eye-popping increases. Palantir shares have soared 120% in 2025 as of Wednesday while Broadcom had jumped nearly 60%.

"I was very surprised by the magnitude of the (Oracle) jump and it shows that there is still a lot of life left in the AI trade and a lot of money still willing to be funneled into the AI trade," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.