When you have a group as hot as the AI stocks, even a drop of water can temporarily douse the flames. Yesterday, it came in the form of a media report on lackluster margins at Oracle Corp. (ORCL).

Specifically, The Information published a report suggesting ORCL’s gross margins were just 14% at its Nvidia Corp. (NVDA)-fueled cloud computing unit. The publication cited internal documents covering a recent three-month period. ORCL is building massive data centers and buying billions of dollars in NVDA chips, then turning around and renting that processing power to Artificial Intelligence companies like OpenAI.

If that business is spinning off low-double-digit margins only – compared to 70% for ORCL overall – it would suggest a couple of things are possible. First, the supply of AI computing power could be overwhelming demand. Second, costs could be rising so fast that profitability is a real problem for service providers.

Oracle Report Douses the AI Trade’s Flames

Source: Yahoo Finance

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Whatever the case, the report dampened enthusiasm for AI stocks yesterday. Many Big Tech names associated with the AI boom tumbled, as you can see in the MoneyShow Chart of the Day. It shows the intraday move in shares of ORCL and NVDA, plus Microsoft Corp. (MSFT) and Meta Platforms Inc. (META), two of the biggest spenders on AI-related projects.

While this is all just “short-term stuff” for now, it does illustrate the risks inherent in trading the market’s hottest stocks. Any little piece of information – no matter what the source – can have an outsized impact on group momentum.

That matters a lot if you’re trading high-leverage vehicles like options, or if your time horizon is measured in hours or days versus weeks or months. So, if that applies to you, watch what happens the next few days carefully. If AI stocks can’t catch fire again soon, you might want to seek trading profits elsewhere to avoid getting burned.