Tech stocks bounced back Friday as falling oil prices and enthusiasm around AI helped investors look past a hotter-than-expected core inflation reading.
The Nasdaq Composite rose more than 1%, while the broader technology sector also gained more than 1% after several difficult sessions for growth stocks. Nvidia and other megacap technology names joined the rebound as Brent crude retreated toward $104 per barrel, easing some of the inflation anxiety that sent Treasury yields sharply higher earlier this week.
Oracle’s AI Growth Gives Tech a Boost
Oracle was one of the biggest stories in technology after reporting fiscal first-quarter results that highlighted enormous demand for AI computing infrastructure. Revenue climbed 30% from a year earlier to $19.3 billion, while total cloud revenue surged 62% to $11.6 billion. Cloud infrastructure was the standout, soaring 121% to $7.4 billion as businesses continued scrambling for computing capacity to train and operate AI models.
Oracle’s backlog also reached $664 billion after the company booked more than $30 billion in new AI cloud contracts during the quarter. The company has now delivered more than 300,000 GPUs to AI cloud customers since the end of its previous quarter. The numbers provided some reassurance that massive AI infrastructure spending is translating into real demand. Still, concerns remain around the cost of that expansion, with Oracle continuing to spend aggressively on data centers while generating negative free cash flow.
Nvidia and Megacap Tech Join the Rebound
Strength extended beyond Oracle as Nvidia and several other members of the Magnificent Seven moved higher alongside the broader technology sector. The rebound is notable after AI-related stocks came under renewed pressure this summer as investors questioned whether soaring valuations had moved too far ahead of earnings growth. Oracle’s accelerating infrastructure business offered another data point supporting the argument that enterprise demand for AI computing remains strong.
Friday’s rally also showed how quickly sentiment toward growth stocks can improve when energy and bond-market pressures ease. After four consecutive losing sessions for the broader market, investors appeared willing to return to some of the technology names hit hardest by this week’s selloff.
Sticky Inflation Keeps Pressure on Growth Stocks
The macro backdrop remains less comfortable. August CPI rose 0.4% from July and 3.4% from a year earlier, while core prices increased 0.3% month over month, above expectations for a 0.2% gain. That hotter core reading pushed expectations for a Federal Reserve rate hike next week sharply higher. The two-year Treasury yield climbed toward 4.6%, reflecting growing confidence that policymakers will tighten monetary policy again.
Higher rates are particularly important for technology stocks because they reduce the present value investors place on future earnings. That creates a tug-of-war between improving AI fundamentals and a rate environment that could make expensive growth stocks harder to justify.
Falling Oil Gives Tech Some Breathing Room
Oil provided the market with some much-needed relief Friday. Brent crude fell roughly 3% to around $104 per barrel after approaching $110 overnight, while WTI slipped back below $100. The pullback helped ease fears that the Middle East energy shock would immediately accelerate inflation even further. But crude remains sharply higher for the month, and record U.S. diesel prices mean energy could continue feeding into transportation and business costs.
For technology investors, that makes oil an increasingly important part of the equation. A sustained retreat could take pressure off yields and valuations, while another surge could quickly revive the inflation trade that punished growth stocks earlier this week.
Looking Ahead
Tech stocks are ending the week on stronger footing, with Oracle’s booming AI infrastructure business reinforcing confidence that demand for computing power remains robust. Falling oil prices have also given growth stocks room to rebound after several sessions dominated by inflation and interest-rate fears. The Fed now becomes the next major test. AI fundamentals may remain strong, but with markets increasingly expecting another rate hike, technology stocks will have to prove they can keep climbing even as borrowing costs remain elevated. The battle between AI-driven earnings growth and tighter monetary policy is likely to remain one of the market’s defining themes heading into next week.