Traders flood into the riskiest S&P 500 stocks on prospect of lower tariffs

As markets rebound on soothing tariff talk, traders are eschewing the safer stocks that have helped them weather rocky US equity markets and embracing their riskier counterparts.

The Invesco S&P 500 High Beta ETF, which holds the S&P 500 stocks with the most outsized movements relative to the index’s daily swings, is crushing the iShares MSCI USA Min Vol Factor ETF, which holds stocks that gyrate much less than the benchmark. Shortly after midday, the daily performance gap between the two is shaping up to be the second-biggest since the start of 2024, trailing only April 9, when reciprocal tariffs were watered down.

Members of the high-beta fund include Nvidia, Super Micro Computer, and Palantir Technologies.

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Margins, and selling the news: analysts look to explain Oracle’s tumble

The somewhat counterintuitive tumble in Oracle shares continued into afternoon trading Friday, despite Wall Street analysts’ more or less favorable reaction to Oracle’s investor day presentation Thursday, where executives said the company’s AI cloud business would eventually sport margins of between 30% and 40%, far better than the figures reported by The Information back on September 7.

And yet, the stock is on its way to its worst day in the last six months. What gives?

Gil Lauria, who covers Oracle for D.A. Davidson & Co. — who has it at “hold” with a $300 price target — has a theory, telling Sherwood News:

“Investors are disappointed that the entire growth acceleration in Oracle is from the Oracle Cloud Infrastructure business, and that Oracle expects the rest of the business to grow low single digits.

The other disappointment came from Oracle acknowledging that the GPU rental business only had 30-40% gross margins, far lower than the 80% gross margins for the rest of the business.”

Other analysts we’ve chatted with on background say they’re not convinced the margin story is the source of today’s slump, suggesting the also plausible explanation that the drop might just be a sign traders bought the stock ahead of the presentation to analysts on Thursday anticipating positive announcements, and now they’re selling simply selling the news.

Analysts generally like what they heard from Oracle, but shares are down

Gil Lauria, who covers Oracle for D.A. Davidson & Co. — who has it at “hold” with a $300 price target — has a theory, telling Sherwood News:

“Investors are disappointed that the entire growth acceleration in Oracle is from the Oracle Cloud Infrastructure business, and that Oracle expects the rest of the business to grow low single digits.

The other disappointment came from Oracle acknowledging that the GPU rental business only had 30-40% gross margins, far lower than the 80% gross margins for the rest of the business.”

Jon Keegan10/17/25

Analysts generally like what they heard from Oracle, but shares are down

The big news out from the Oracle AI World conference was broadly positive: that margins on cloud infrastructure can be as high as 35%, and that the company predicts $166 billion in infrastructure revenue by 2030.

And in the wake of that news, today UBS raised its price target for Oracle shares to $380 from $360, saying they are undervalued.

But investors appear to have some concerns about Oracle’s huge capex plans, which are fueled by huge AI infrastructure deals with OpenAI and Meta, as shares dropped over 7% in Friday trading.

Analysts have pointed to Oracle’s high cash burn as it pursues its AI build-out and potential financing needs as flies in the ointment that could blunt the impact of the company’s strong longer-term growth forecasts.

On Friday, Jefferies analysts wrote:

“Questions remain about ORCL’s capex requirements to meet growing demand, as there was no forward-looking commentary on capex at the Analyst Day. Capex will need to ramp in line with [Oracle cloud infrastructure] revenue growth, raising concerns about ORCL’s financing options to support this expansion.”

However, if that’s the reason why the stock is getting hit today, it would mark a distinct change in how investors are evaluating the AI trade. Companies have tended to be increasingly rewarded for their aggressive capex commitments to enhance the boom, based on optimism that investments in this would-be revolutionary technology will bear fruit.

Friday’s dip comes on the back of a strong run leading up to the yesterday’s investor conference, fueled by a flurry of AI headlines. Oracle shares have gained over 18% in the past three months and more than 70% so far this year, well outpacing the Nasdaq’s approximately 7% and 16% rise over the same time periods.

Matt Phillips10/17/25

AST SpaceMobile drops after Barclays cuts rating to “underweight”

AST SpaceMobile, which provides cellular services from space, dove in early trading after Barclays analysts cut their rating on the shares to “underweight” (essentially a sell) from “overweight” (or a buy), citing “excessive” valuation on the still money-burning company. The fact that analysts went from “buy” to “sell” — with no momentary stop at a “hold” or “neutral” rating — makes it a fairly rare “double downgrade.”

They wrote:

“Valuation has run ahead of fundamentals... In our last update, we increased our price target from $38 to $60 as we took a more constructive view on pricing; we found it supportive that TMUS/Starlink launched a text only service for $10 per month and believe that AST products which will be richer (text, call, broadband) could see higher prices points. Since then the stock price has doubled from $48 to $95.7.”

With the shares up almost 120% over the last month through Thursday, and a price-to-forward-sales ratio of 140x — the Nasdaq Composite is around 5x — the stock might be due for a cooling-off period.

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