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Good morning.
The Commodity Futures Trading Commission revealed its first proposed rules for prediction markets on Wednesday. The regulator said it would prohibit trades on war, terrorism, assassination and illegal activity because they’re not in the public interest. No argument here.
Most sports event contracts will remain fair play, but there are exceptions: The CFTC said it would likely restrict betting on player injuries, in-game altercations, referee activity, and easily manipulated in-game props, like specific pitches in a baseball game. Last year, two former pitchers for the Cleveland Guardians were indicted on federal charges related to a pitch-rigging scheme. Rest assured, New York Mets fans, the players on their team’s $375 million payroll aren’t running an ongoing game-losing scheme, that’s business as usual at Citi Field.
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As summer approaches, the consumer price index is unfortunately trending in the same direction as the thermometer. Annualized inflation accelerated to 4.2% in May, the Labor Department said Wednesday, quite a bit hotter than April’s 3.8% reading.
Obviously, rising energy prices stemming from the war in Iran are a pain in the gas. But analysts note there are other inflationary forces that could outlast the conflict.
Taking an Unplanned Hike
First, energy accounted for more than 60% of the monthly CPI increase, officials said. Gas prices alone rose 40.5% year-over-year, which you know all too well from your uncle’s rants in the family group chat. Core CPI, which strips out volatile energy and food prices, rose at an annualized 2.9% pace, up from 2.8% in April. While not as hot, that remains too much for the Federal Reserve’s 2% target (the central bank’s preferred inflation barometer is the Personal Consumption Expenditures Price Index, which tends to come in roughly a quarter point less than CPI; it will next be updated on June 25).
Already, there is concern this is putting the Fed’s 2026 policymaking roadmap in jeopardy. Markets overwhelmingly expect the interest rate-setting Federal Open Market Committee will hold rates when it meets next week. But traders are now pricing in a 46% chance of a rate hike by October and a 62% chance by December, according to the CME FedWatch tool. That’s a stark change from the beginning of the year, before the U.S.-Iran war, when markets expected a year of dovish rate cuts. “The stock market has been climbing a wall of worry and has been able to rally on stronger earnings and stable interest rates, but a rising rate environment is another thing altogether,” said Northlight Asset Management chief investment officer Chris Zaccarelli. Even if the Iran conflict ends, allowing energy markets to begin to normalize and curb inflation, there’s another major factor driving costs:
- “The biggest area of ongoing concern for inflation is the continued upward pressure on prices from labor-intensive services,” said Bill Adams, chief economist at Fifth Third Commercial Bank. “This includes gardening and lawncare [up 10.8% year-over-year], home healthcare [up 7.9%], nursing home and adult day services [up 4.6%], and day care and preschool [up 3.5%].”
- “The industries providing these services are feeling outsize effects from tighter immigration policies,” he added. “These prices will likely keep rising faster than other costs in household budgets.”
The US saw net negative migration for the first time in half a century last year and, on Wednesday, President Trump signed a $70 billion bill to fund the enforcement agencies leading his administration’s crackdown on immigration until the end of his term.
  Losing Its Mettle: Gold, normally a resilient hedge against inflation, fell 4.5% Wednesday to $4,072.16 per ounce and is down roughly 20% since the war in Iran began. Until yesterday, it hadn’t been below $4,200 since December. In this case, inflation risks are working against the precious metal’s value because higher rates drive down the appeal of non-yielding assets compared to US Treasury notes.
Written by Sean Craig
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Oracle foresaw a looming SaaSpocalypse and decided to transform into an AI infrastructure company. It just didn’t divine how expensive the transition would be.
In its fourth-quarter earnings call on Wednesday, the company said its capital expenditures continue to balloon and revealed plans to raise another $40 billion through debt and equity financing in the current fiscal year to fund the pivot, nearly matching the $43 billion in debt it already raised last year. Shares of the company are down 9% in pre-market trading this morning.
The good news? There’s plenty of demand waiting on the other side of its massive investments.
BYOC
The company posted revenue of nearly $19.2 billion, up 21% year-over-year and edging out Wall Street’s expectations. The uptick comes even as sales for its legacy software unit fell 2% — not great, though not exactly SaaSpocalyptic, either. Meanwhile, Oracle Cloud Infrastructure (OCI), a.k.a. its mission-critical AI cloud infrastructure unit, saw revenue explode 93% year-over-year to $5.8 billion.
Even better news for Oracle is that there are no signs that demand is slowing down. The company said it expects OCI to account for three-quarters of its total revenue by 2030, and said that its remaining performance obligations (RPO), a backlog of future orders, now sits at $638 billion, up $85 billion from just the previous quarter.
A deeper look under the hood reveals some shrewd financial maneuvering amid the big spending, and experts told The Daily Upside that the growth is enough to justify the additional debt:
- For instance, most of the RPO increases in the past two quarters were from prepaid agreements with customers, Oracle said Wednesday, adding that many customers are opting for the company’s “Bring Your Own Chips” strategy, reducing the costs for Oracle’s data center buildout.
- “Oracle doesn’t have the luxury of frivolous or unbridled capex spending without fiscal discipline,” Scott Bickley, Advisory Fellow at Info-Tech Research Group, told The Daily Upside. “If the funding dries up and everything slows down, they’ve already got a flywheel generating revenue, so that they can buffer that debt overhang themselves.”
Much Obliged: The RPO figure does come with one caveat: more than half of it stems from OpenAI, whose CFO has reportedly expressed concerns over its ability to pay for future compute commitments as it continues to find itself squeezed by Google’s AI Overview search results on the low end and Anthropic’s super-powered models on the high end. “I think [Oracle’s OpenAI exposure] has to give one pause,” Bickley said. “I think OpenAI is the Achilles heel, not just for Oracle, but for all of the hyperscalers and all the way up to Nvidia.” On the other hand, the non-OpenAI half of $638 billion is still $319 billion, representing years of revenue growth.
Written by Brian Boyle
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Big rigs are expected to bring in big money for the companies building the trucks and the ones managing what’s in them and who drives them — if anyone does at all.
Amazon yesterday announced it’s opening up its less-than-truckload services to all businesses, letting any company reserve space by the pallet in its freight trucks. Stocks of shipping companies like UPS and FedEx fell after the announcement. Amazon already dominates the last mile, with its local drivers out-delivering UPS, FedEx and USPS in terms of volume, ShipMatrix found. Now it wants the miles before that.
Ghost Trucks Incoming
Third-party logistics as a global market is worth more than $1.3 trillion, estimated Armstrong & Associates. Amazon’s been buying up trucks to own more of the road, and its Amazon Relay service acts as an Uber-style app for truck drivers to book gigs.
But with truck-driving facing a persistent labor shortage, two of Amazon’s partners yesterday pressed the pedal down on a driverless future:
- Volvo, which has supplied heavy-duty electric trucks to Amazon in the past, laid out yesterday ambitious expectations for its autonomous truck biz. The vehicle-maker said it expects to start putting robo-trucks on US roads within months and have 300 trucks operating stateside by the end of next year. Volvo’s aiming to bring in $3 billion from its autonomous biz in five years.
- Also yesterday, autonomous trucking company Einride saw its stock upshift nearly 90% after going public on the Nasdaq. The acceleration was so aggressive that Nasdaq put a temporary pause on trading the newbie stock. Einride has a fleet of 200 autonomous trucks on the road that ferry heavy loads for clients including PepsiCo and Heineken; in April, it struck a deal to supply 75 manually operated electric trucks to Amazon.
Freight-eningly Good: Amazon’s shipping has gotten so fast that customers can wait to order TP until their last roll. Now, it’s turning its logistical expertise into a business that third parties that don’t sell on its platform can pay for, last month launching its Supply Chain Services biz to do just that. The move could mirror what it did with Amazon Web Services, turning the cloud it built for itself into a thriving part of its business.
Written by Jamie Wilde
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- Looking Into It: Half of Americans are concerned artificial intelligence could leave a member of their household out of a job; Anthropic pledged $200 million to study the technology’s impact on the labor market.
- NYC You in Court: Uber sued New York City to block a new law that will protect rideshare drivers from “wrongful deactivations” and allow some 12,000 to petition for reinstatement.
- Is Your Legacy Locked In? If you’re wondering how to make the most of your $5 million+ portfolio, start by downloading the Tax-Efficient Wealth Management Guide for Affluent Investors. Discover new methods to save on taxes through savvy estate and legacy planning, strategic philanthropy and tailored investments. Get the guide.*
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