Wall Street futures slide as Oracle’s forecast revives AI bubble fears

Dec 11 (Reuters) – U.S. stock index futures tumbled on Thursday after Oracle’s forecasts raised fresh concerns about hefty AI spending and outweighed optimism following a less hawkish tone from the Federal Reserve.

Oracle slumped ‍12% in premarket trading after its quarterly forecasts missed analysts’ estimates and the company said annual spending would rise by $15 billion compared with its earlier expectations.

The cloud company had gained prominence earlier this year after announcing deals to build AI cloud data centers for OpenAI.

However, its shares were on track for their biggest quarterly ‌loss since mid-2002 on worries that heavy reliance on debt ‌financing could be a recipe for a bubble similar to the early 2000s.

“Oracle has been at the epicentre of the AI financing debate, lacking the mammoth cash flows of the more traditional cloud giants,” said Matt Britzman, senior equity analyst at Hargreaves ​Lansdown.

Shares of other artificial intelligence companies were also hit.

Chipmakers Nvidia and Broadcom fell 1.6% and 1.5%, respectively, while hyperscalers such as Microsoft and Amazon.com ‍dropped 1% each and CoreWeave declined 3.3%.

At 04:30 a.m. ​ET, Dow E-minis were down 144 points, or 0.30%, S&P 500 E-minis were down 42.5 points, ​or 0.62% and Nasdaq 100 E-minis were down 207.5 points, or 0.80%.

Wall Street’s fear gauge, the CBOE volatility ‍index, climbed 0.71 points and was last at 16.47.

Meanwhile, the Federal Reserve lowered borrowing costs by 25 basis points as expected on Wednesday, and Chair Jerome Powell signaled a pause on further easing as the central bank waits for more data on inflation and employment.

However, traders are already pricing ‍in 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 ‍advisor Kevin Hassett is the front-runner for the job.

“We’re ​not surprised to see near-term optimism in the markets ​given that ⁠the Fed continues to cut rates even though the ‌economy is growing,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

“However, we think the rose-colored glasses may come off once investors realize that the path to lower interest rates may take longer – or may not materialize at all – to the extent that they believe it will.”

(Reporting by Johann M Cherian in Bengaluru; ⁠Editing by Sriraj Kalluvila)