Oracle stock falls after report reveals thin margins in AI cloud business
The dominance of the technology sector is old news for the stock market, but it’s no less potent at the start of the fourth quarter. A set of ETFs continues to highlight that the biggest tech firms are still leading the market, based on trading through Monday’s close (Oct. 6).
The Technology Select Sector SPDR® Fund (NYSE:XLK), which closed at a new record high yesterday, has rallied 24.3% year to date, well above the broad market’s 15.6% rise via SPDR S&P 500 ETF (NYSE:SPY).
A battle for second place this year is underway between two very different sectors: communication services (XLC) and utilities (XLU). XLC has a slight edge at the moment via a 21.4% year-to-date gain, but after its recent rally XLU is only fractionally behind with a 21.1% advance in 2025.
The weakest sector: consumer staples (XLP), which is essentially flat this year, posting a 0.4% rise.
Artificial intelligence-based business opportunities are front and center for the tech rally this year. The latest example of animating AI bulls is the announcement that Deloitte will provide its 470,000 workers around the world with Anthropic’s AI assistant Claude as a resource.
Earnings for tech firms generally remain robust. FactSet reports:
“At the sector level, the Information Technology sector has the highest number of companies issuing positive EPS guidance of all 11 sectors at 36. This number is well above the 5-year average of 21.4 and above the 10-year average of 19.5 for the sector.”
The allure of utilities is also related to AI in the form of surging demand for electricity via the growing use of data centers to power the growing use of artificial intelligence tools. The financial news site 24/7 Wall Street reports:
“Both large and regional utilities (e.g., Constellation (NASDAQ:CEG), Duke (NYSE:DUK), Southern (NYSE:SO), DTE (NYSE:DTE), Black Hills (NYSE:BKH)) as well as natural gas providers and pipeline firms are expected to see long-term growth as AI drives massive infrastructure expansion.”
Another driver of the utilities sector: expectations for more rate cuts by the Federal Reserve. Utilities are prized for relatively high dividend yields, and so lower interest rates enhance the allure of these stocks.
Fed funds futures are pricing in a high probability that the central bank will cut its target rate again at the next FOMC meeting on Oct. 29.