Oracle’s AI spending spooks markets as tech stocks slide on bubble fears

Oracle’s aggressive push into artificial intelligence has rattled investors, fuelling fears of a new tech bubble as weak forecasts triggered a broader sell-off in technology stocks.

US stock index futures fell sharply on Thursday after Oracle warned that its annual spending would rise by about $15 billion above earlier expectations, largely driven by investments in AI infrastructure. The company’s quarterly outlook also missed analysts’ estimates, overshadowing a more accommodative signal from the US Federal Reserve.

Shares in Oracle dropped about 12 per cent in premarket trading, according to Reuters, putting the stock on course for its worst quarterly performance since the early 2000s. The slump has revived concerns that the current AI boom may be built on heavy borrowing rather than sustainable cash flows.

Oracle has gained prominence this year after announcing deals to build AI-focused cloud data centres, including infrastructure tied to OpenAI. However, investors appear increasingly wary of the scale and financing of these commitments, particularly as economic uncertainty persists.

“Oracle has been at the epicentre of the AI financing debate, lacking the mammoth cash flows of the more traditional cloud giants,” Matt Britzman, senior equity analyst at Hargreaves Lansdown, said in comments cited by Reuters. He warned that reliance on debt to fund rapid expansion could echo excesses seen during the dotcom era.

The concerns spilled across the sector. Shares of chipmakers Nvidia and Broadcom fell more than 1 per cent, while cloud heavyweights Microsoft and Amazon slipped about 1 per cent each. CoreWeave, another company closely linked to AI infrastructure spending, dropped more than 3 per cent.

At the same time, Wall Street’s volatility gauge, the CBOE VIX index, edged higher, signalling growing investor unease. US equity futures for the S&P 500 and Nasdaq pointed to a weaker open, reflecting broader risk aversion.

The market reaction came a day after the Federal Reserve cut interest rates by 25 basis points, as widely expected. Fed chair Jerome Powell signalled caution on further easing, saying policymakers would wait for more clarity on inflation and employment. Despite this, traders are pricing in additional rate cuts next year, betting that future leadership at the central bank could tilt policy in a more dovish direction.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the near-term optimism following the rate cut could fade quickly. “The rose-coloured glasses may come off once investors realise that the path to lower interest rates may take longer — or may not materialise at all,” he said, according to Reuters.

For now, Oracle’s stumble has sharpened a central question facing markets: whether the massive bets being placed on artificial intelligence will deliver durable returns, or whether mounting costs and leverage risk inflating another technology bubble just as growth expectations soften.