We're raising our Nvidia price target — plus, reports on Oracle's big new customer

The S&P 500 reached a new record high, primarily driven by technology and AI infrastructure plays, while softening bond yields solidified expectations for a 25bps Fed rate cut next week. In corporate developments, Netflix and Amazon announced a strategic ad partnership leveraging Amazon's commerce data, underscoring Amazon's growing influence in streaming advertising, though Amazon shares declined on AWS growth concerns. Concurrently, Oracle surged over 40% on robust backlog growth, including a $300 billion OpenAI deal, signaling immense demand for AI infrastructure and lifting related stocks like Nvidia, whose price target was subsequently raised, highlighting the accelerating cloud computing race.

Analysis

The S&P 500 has reached a new record, but gains are concentrated in the technology sector, specifically beneficiaries of the artificial intelligence infrastructure buildout, while consumer and healthcare stocks lag. This market bifurcation is underscored by a favorable macroeconomic backdrop, with declining bond yields following a surprise drop in the August producer price index fueling strong expectations for a 25 basis point Federal Reserve rate cut. The primary catalyst for the tech rally is Oracle's staggering performance, which saw its stock surge over 40% on the back of monumental backlog growth and a multi-year framework targeting $114 billion in cloud infrastructure revenue by fiscal 2029. This outlook, bolstered by a reported $300 billion deal with OpenAI requiring 4.5 Gigawatts of power, signifies an acceleration in the cloud computing race, lifting related stocks across semiconductors (Nvidia, Broadcom), data center equipment (Vertiv), and power infrastructure (GE Vernova). In a separate key development, Netflix and Amazon have formed a strategic advertising alliance. This partnership grants advertisers access to Netflix's premium inventory via Amazon's demand-side platform (DSP), crucially leveraging Amazon's proprietary commerce data for superior ad targeting. This move strengthens Amazon's position in the ad-tech space, creating competitive headwinds for players like The Trade Desk. However, Amazon's shares traded lower as investor focus remains fixed on the growth trajectory of Amazon Web Services (AWS), with Oracle's strength reigniting concerns about AWS's competitive standing.

Key Decisions for Investors

• Given Oracle's massive backlog and its positive ripple effect, investors should assess exposure to the entire AI infrastructure value chain, including not only semiconductors like Nvidia and Broadcom but also second-derivative plays in power and data center equipment such as GE Vernova and Vertiv.
• For Amazon, the positive news from its advertising partnership with Netflix is being overshadowed by concerns over AWS growth; investors should closely monitor AWS performance metrics in the next earnings cycle, as this remains the primary driver of the stock's valuation.
• The Netflix-Amazon ad partnership poses a significant competitive threat to ad-tech platforms like The Trade Desk; investors in this space should watch for further evidence of advertising budget shifts toward Amazon's data-rich DSP.
• While a Fed rate cut is widely expected, any upside surprise in Thursday's Consumer Price Index (CPI) data could disrupt market sentiment and challenge the consensus for three rate cuts by year-end, warranting caution in rate-sensitive positions.