Oracle plunged 14% after its quarterly forecasts fell short of analysts’ estimates and the company raised its annual spending forecasts, reigniting worries that the pace of profitability for artificial intelligence companies was not as fast as expected.
The cost of insuring against the cloud company defaulting surged, with shares on track for their biggest quarterly loss since mid-2002 on worries that heavy reliance on debt financing could fuel an AI bubble similar to the dotcom bust of the early 2000s.
“Oracle has been the poster child for volatility and that will continue. The spending itself is a stand-alone issue and part of the CapEx is a bit opaque,” said Art Hogan, chief market strategist at B. Riley Wealth.
Technology led declines among S&P 500 sectors with a 1.6% drop, while an index tracking chips fell 2% as heavyweight Nvidia slid 3.1%.
Other AI infrastructure companies such as CoreWeave fell 5.7%, while Applied Digital and Nebius lost 3.6% and 4.4%, respectively.
At 9:48 a.m. ET, the Dow Jones Industrial Average rose 291.76 points, or 0.61%, to 48,350.89, the S&P 500 lost 30.79 points, or 0.45%, to 6,855.89 and the Nasdaq Composite lost 233.46 points, or 0.99%, to 23,421.95.Wall Street’s fear gauge, the CBOE volatility index, rose 0.33 points to 16.1.
Meanwhile, the Federal Reserve lowered borrowing costs by 25 basis points as expected on Wednesday. Although Chair Jerome Powell signaled a pause on further easing, investors were relieved that rate hikes were not on the horizon, at a time when markets expect higher interest rates in other developed economies by the end of 2026.
Traders see at least 50 bps of monetary easing next year on expectations that U.S. President Donald Trump’s appointee to the Fed Chair will likely be a policy dove. White House economic adviser Kevin Hassett is the front-runner for the job.
The Russell 2000 index tracking rate-sensitive small caps outperformed broader markets and was up 0.6%, while the price-weighted blue-chip Dow got a lift from a 1.4% rise in shares of Goldman Sachs.
Data from the Labor Department showed jobless claims rose 236,000 for the week ending December 6, compared to estimates of 220,000.
Among others, Walt Disney gained 2% after the streaming firm said it will make a $1 billion equity investment in OpenAI. AI bubble concerns also hurt crypto stocks such as Strategy , which lost 3.3%, and Bit Digital, which fell 3.1% as bitcoin briefly slipped below $90,000.
Advancing issues outnumbered decliners by a 1.98-to-1 ratio on the NYSE and by a 1.12-to-1 ratio on the Nasdaq.
The S&P 500 posted 32 new 52-week highs and one new low, while the Nasdaq Composite recorded 83 new highs and 38 new lows.
