BY COMFORT OGBONNA
U.S. stock index futures fell sharply on Thursday, dragged lower by renewed concerns over the sustainability of massive AI-related investment following disappointing forecasts from Oracle. The decline overshadowed the cautious optimism that had briefly emerged after the Federal Reserve struck a less hawkish tone at its latest policy meeting.
Oracle shares plunged 12% in premarket trading after the company issued quarterly forecasts that fell short of analysts’ expectations. Executives also revealed that annual spending would climb by an additional $15 billion beyond previous estimates, raising fresh doubts about whether such aggressive investment can be sustained. Earlier this year, Oracle had been hailed as a major player in the AI boom, thanks in part to agreements to build specialized AI cloud data centers for OpenAI. But the latest outlook indicates a sharp reversal in sentiment.
The company is now on pace for its steepest quarterly drop since mid-2002, as investors grow uneasy about its heavy dependence on debt to fuel expansion. Those concerns have stirred comparisons to the tech bubble of the early 2000s. Matt Britzman, senior equity analyst at Hargreaves Lansdown, noted that Oracle has become a focal point in debates over AI financing, highlighting its lack of the substantial cash reserves that larger cloud providers possess.
The caution spread across the broader technology sector. Leading AI chipmakers Nvidia and Broadcom slipped 1.6% and 1.5%, respectively, in premarket trading. Major cloud and hyperscale firms such as Microsoft and Amazon.com also moved lower by about 1%, while CoreWeave dropped 3.3%. Together, the declines signaled growing investor unease about how much capital the AI race will require — and how quickly companies can expect meaningful returns.
By 04:30 a.m. ET, Dow E-minis were down 144 points, or 0.30%, while S&P 500 E-minis fell 42.5 points, or 0.62%. Nasdaq 100 E-minis slid 207.5 points, or 0.80%, marking a pronounced pullback in tech-heavy futures. Meanwhile, the CBOE volatility index, widely seen as Wall Street’s fear gauge, jumped to 16.47, reflecting greater market anxiety.
The backdrop for the sell-off is a Federal Reserve that cut interest rates by 25 basis points on Wednesday, a move that had been fully anticipated. Fed Chair Jerome Powell indicated that the central bank would likely pause further easing while it assesses incoming data on inflation and labor markets. Despite this cautious stance, traders continue to bet on at least 50 basis points of additional rate cuts next year, especially as expectations grow that U.S. President Donald Trump’s nominee for Fed Chair may take a more dovish approach. Kevin Hassett, currently a White House economic advisor, is seen as the leading contender.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the initial optimism following the Fed’s decision was not surprising, given that the central bank is easing policy even with continued economic growth. However, he warned that investors may soon reassess their expectations. According to Zaccarelli, the anticipated path toward lower rates could be longer and more uncertain than markets currently assume, especially if inflation or employment data fails to justify additional cuts.
Overall, the early market weakness reflects a broader reassessment of both monetary policy and the financial sustainability of the AI investment boom — two forces that have been central to this year’s market narrative.
Original article
Comments