AI Investment Boom Fuels Tech Rally: Larry Ellison’s $100 Billion Prediction and Market Strategies
Plus – An offer to review a new tool from our friends at SpotGamma
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Our View
There are a lot of reasons for the big tech names going back up—oversold conditions, bargain hunters, tech ETF buying; the list could go on and on. There are too many reasons to list them all here, but somewhere near the top of the list is this story on Larry Ellison. I know there is a lot of talk about an AI bubble for which, unlike the tech bubble, there is no shortage of investment capital.
Oracle’s Larry Ellison Sees $100 Billion AI Boom Powered by Nuclear Energy — Barrons.com
Larry Ellison has a message for the artificial-intelligence infrastructure skeptics: The current boom will last for years, and not end soon. When asked on Oracle’s Monday earnings conference call about the sustainability of the latest wave of AI model training infrastructure spend, the executive was optimistic. “If your horizon is over the next five years, maybe even the next ten years I wouldn’t worry about it,” Oracle’s founder, chairman, and chief technology officer said. “This business is just growing larger and larger and larger. There is no slowdown or shift coming.”
Ellison said there are a few large technology companies, and possibly even one country that will battle it out for AI model “technical supremacy” in the next several years. And to be competitive in the cutting-edge AI model race will not be cheap, he says. The entry price “is around $100 billion. Let me repeat, around $100 billion. That’s over the next four, five years for anyone who wants to play in that game,” he said. “That’s a lot of money and it doesn’t get easier.”
Earlier this year in a podcast interview, Meta Platforms founder, Chairman, and CEO Mark Zuckerberg said current data centers were roughly in the order of 50 megawatts in electrical power needed, but said someday one gigawatt data centers would be built. Oracle seems to be almost there. Ellison mentioned Oracle is currently building a 800 megawatt data center that will have “acres of Nvidia GPU clusters” that will be used to train one of the world’s largest AI models. Further, the company is already in the design phase for a data center that will require over one gigawatt of electricity. “The location and the power place we’ve located,” he said. We “already got the building permits for three nuclear reactors. These are small modular nuclear reactors to power the data center. This is how crazy it’s getting.”
Oracle reported a strong fiscal first quarter late Monday.
Our Lean
Today we have two economic reports—the Import Price Index at 8:30 and Consumer Sentiment—and the week-two options expiration. The S&P has been up four days in a row, and from its September 6 5,394.00 low to Thursday’s 5,608.50 high, the ES has rallied 196.5 points. The NQ made its low at 18,339.75 on September 6th and made a high at 19,483.50; that is a gain of 1,143.75 points. The reason I do this is that, while I still think higher prices, I think it’s important to get ahead of the rally but get behind it on the pull backs. The most recent patterns have been: gap higher, sell off, make a low, rally again, and then fall into a chop until the gamma and the boys with the better seats show up later in the day and smoke it higher. Like I said, it’s a presidential election year, and the PPT is cutting rates and printing money. You want to fight that?
MrTopStep Levels:
MiM and Daily Recap
The ES traded up to 5581.50, sold off down to 5562.75, and rallied up to 5574.25 before opening Thursday’s session at 5564.00.
After the open at 5564.00, it sold off down to 5557.00 at 9:36 and then dropped 16.75 points to the low of the day at 5540.25 at 9:50. It then rallied 35.25 points up to 5575.50 but got hit by a wayward sell program that knocked the ES down to 5556.00.
It then rallied 35.5 points up to 5579.25 at 11:15. After reaching the high, the ES sold off down to 5555.75 at 11:27, rallied up to 5563.00, and then sold off 12.5 points down to 5550.50 at 12:00.
It then rallied to 5569.25 at 12:39, pulled back to 5562.50 at 12:42, and then rallied 44 points up to 5606.50. After the high, the ES pulled back to 5596.25, rallied up to a new high at 5607.00 at 2:39, and then got hit by an algo bomb that knocked the ES down 29 points to 5578.00 at 2:54. It then rallied 27 points up to a lower high at 5605.00 at 3:45.
It traded 5597.25 as the 3:50 cash imbalance showed $2.1 billion to sell, traded 5594.00, and traded 5603.50 on the 4:00 cash close and printed 5605.00. After 4:00, the ES didn’t do much; it traded down to 5594.25 and settled at 5596.50, up 35.25 points or +0.63%. The NQ settled at 19,413.50, up 142.50 points or 0.74%.
In the end, the stock market is on the march. In terms of the ES’s overall tone, it was firm but not without some algo bomb drops. In terms of the ES’s overall trade, volume was steady at 1.64 million contracts traded.
Join us on the MiM and Spygate: Special Combined Rate
Technical Edge
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NYSE Breadth: 71% Upside Volume
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Nasdaq Breadth: 64% Upside Volume
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Advance/Decline: 75% Advance
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VIX: ~17.10
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Fair Value: 5.10
Guest Post – SpotGamma
Futures are again higher, with the SPX pushing up against the 5,600 zone. As you can see below, that zone is in positive gamma territory, and that positive gamma increases should the SPX go higher. This implies the market is more supported into higher S&P prices, as positive gamma contracts volatility (i.e. we are looking for sub 1% moves today).
With that, resistance should pick up into 5,600, with support at 5,550.
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In The Rooms
On September 12, 2024, David from Polaris Trading Group started the day by observing an “opening fade short” as the previous closing price was violated, triggering short positions. He highlighted the key 5545 “Line in the Sand” level, which saw a buy response as the market oscillated around this fulcrum. David advised patience in waiting for a directional resolution, acknowledging that the bulls had control of the market. As the price moved above the prior closing, he authorized dip buying, and the initial upside target of 5565–5575 was reached as per his Daily Trade Strategy.
Despite the bullish momentum, David remained cautious due to sudden market volatility, including an 18-handle drop in 44 seconds, which he attributed to aggressive algorithms. He advised against leaving resting limit orders and opted to stay on the sidelines, letting the “dueling algos” fight it out. In the afternoon, he noted an “Afternoon Rug Pull” that retraced to the morning highs, and he observed volatile “Pinball Wizard” action into the closing bell. Overall, David was more focused on observing and analyzing rather than taking an active trading role.
Join the PTG Trading Community: https://mrtopstep.com/polaris-trading-group/
Economic Calendar
For a more complete Economic Calendar see: https://mrtopstep.com/economic-calendar/
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
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