Last Wednesday, Larry Ellison, the executive chairman and chief technology officer of Oracle, saw his net worth jump by $101 billion—the biggest one-day increase ever recorded on the Bloomberg Billionaires Index—to $382 billion. That happened after the company announced at its quarterly earnings conference that Google's Gemini AI models would become available on Oracle's cloud infrastructure. That sent the company's stock soaring by 40% (chart).
Last Wednesday, Larry Ellison, the executive chairman and chief technology officer of Oracle, saw his net worth jump by $101 billion—the biggest one-day increase ever recorded on the Bloomberg Billionaires Index—to $382 billion. That happened after the company announced at its quarterly earnings conference that Google's Gemini AI models would become available on Oracle's cloud infrastructure. That sent the company's stock soaring by 40% (chart).
In the August 10 QT, we wrote: "The sky seems to be the limit for the cloud providers. More and more of us are using AI's large language models, such as Gemini, GROK, ChatGPT, Claude, and Copilot, as tools to conduct research, write software, create content, and work more productively. These AI tools are all processing and storing our interactions with them in the cloud and learning from these interactions to become more useful to us. As the tools become more useful, the cloud companies earn more, and they must spend more to expand their data center capacity. Our collective ability to process more data leads us all to create more data to process. And so on. So the sky really is the limit!"
Also having a good move to the upside last week was the S&P 500 Investment Banking & Brokerage stock price index (chart). It has been rising into record-high territory in recent weeks. We've recommended overweighting the S&P 500 Financials since the start of the current bull market in October 2022. We've done the same for the Information Technology, Communication Services, and Industrials sectors of the S&P 500. So far, so good.
We are now in the sweet spot of the bull market, in which Financials benefit from increasing M&A and IPO activity triggered by rising stock prices. It's similar to the sky-is-the-limit story for the cloud companies above. Higher stock prices lead to more investment banking activity, which in turn drives the stock prices of Financials higher. In both cases, the result could eventually be a speculative bubble that bursts.
For now, we reckon that we are in the fourth inning of a cyclical investment banking boom (chart).
As for the S&P 500, the bull market remains sustainably fueled by rising record forward earnings per share (chart). It rose to $293.97 last week and is on track to exceed $300 by the end of the year as it converges with the analysts' consensus estimate for 2026, which has increased to $304.59 and looks likely to continue to rise. The forward P/E has stabilized around 22.0 in recent weeks.
Truly remarkable is that the forward profit margin of the S&P 500 has continued to rise to record highs (chart). It is currently 13.9% despite higher tariff costs and labor shortages. This confirms our upbeat outlook for productivity growth.
Meanwhile, the bull-bear ratios remain relatively neutral (chart). There aren't too many bulls, so there should be more upside for the stock market on a sentiment basis.
Last Thursday, economists lost some more of their confidence in the labor market when initial unemployment claims jumped 27,000 to 263,000 on a seasonally adjusted basis. We observed that the increase was attributable to an unusual 15,304 spike in Texas on a non-seasonally adjusted basis (chart). Seasonally adjusted, it was up 16,900. That might be a one-time aberration, or else oil-field employment may be starting to fall along with the rig count.
