Chokepoint
Oil has its wildest day in 20 years, Oracle posts a big earnings beat, and the S&P 500 welcomes four new companies.
Trillions of dollars were eroded and added back into the market in a violent Monday session on Wall Street.
Crude oil futures rallied 30% to US$119.48 as traders priced in signs of a looming global shortage. Tanker tracking data showed that 80% of oil transits through the critical chokepoint, the Strait of Hormuz, had stopped.
Course correction began after G7 nations discussed the potential release of up to 400M barrels from strategic reserves, along with a CBS interview in which Trump declared the war was ‘very complete, pretty much.’ WTI proceeded to drop 32%, effectively reversing the spike in just 18 hours. But on the opposite end of the oil trade were U.S. equities.
All three major indices staged a comeback on Monday, adding back US$5T of market cap that had been erased in earlier trade. The potential disruption to oil flows set the tone for the week’s trade, but there were plenty of other bottleneck narratives driving investor activity.
One of them is AI compute. Oracle ($ORCL) has taken on more debt than any AI infrastructure player to service that demand. And based on Q3 earnings, that bet seems to be paying off. The firm reported a 325% increase in remaining performance obligations (RPO) – or future contracted revenue – to US$553B. $ORCL shares gained 10% in Tuesday’s after hours session.
But those creating bottlenecks capture the most value. For the past decade, Nvidia ($NVDA) has done so with CUDA, locking developers into its GPUs. Now, the chipmaker plans to use open source AI agent platform NemoClaw to push its influence further up the stack. Legacy software companies Salesforce ($CRM), Adobe ($ADBE) and Alphabet ($GOOGL) are reportedly already in integration talks.
Nvidia also signalled to memory chip manufacturers that it'll use all their expanded production. Sandisk ($SNDK) and Micron ($MU) moved higher after CEO Jensen Huang commented, ‘I love constraints. In a world of constraint, you have no choice but to choose the best. You can't squander your choice.’
The S&P 500 index has constraints of its own: 500 spots reserved for the best stocks in the market. This week, Vertiv ($VRT), Lumentum ($LITE), Coherent ($COHR) and EchoStar ($SATS) joined the club. They will replace Match Group ($MTCH), Molina Healthcare ($MOH), Lamb Weston ($LW) and ZoomInfo Technologies ($GTM), which were all relegated in the quarterly rebalance.
There is one chokepoint retail investors love: a short squeeze. Telehealth player Hims & Hers ($HIMS) is one of the most shorted U.S.-listed firms, with short interest representing 39% of its float. But $HIMS shares are up 50% this week after a surprise partnership with Novo Nordisk ($NVO), allowing it to sell Ozempic and Wegovy on the platform.
Markets may move on narratives, but profits are often found through constraints. Find the bottleneck, and the right trade will find you.
This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.
