[New York Stock Exchange] Broad AI Bubble Fears from Oracle Lead to Across-the-Board Decline... Nasdaq Down 1.81%

FT: "Oracle Faces Difficulties Attracting Data Center Investment"
Concerns Over AI Investment Overheating Cool Tech Stock Sentiment
Unclear November Jobs Report Clouds Rate Path Outlook
Waller: "Further Cuts Desirable... No Need to Rush"
Inter

On December 17 (local time), all three major U.S. stock indexes closed lower amid renewed concerns over an overheating in artificial intelligence (AI) investments. Reports that Oracle is facing difficulties attracting investment for its large-scale data center construction project sharply cooled investor sentiment toward AI-related stocks.

On the 17th (local time), a trader is working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News Agency

On this day at the New York Stock Exchange, the Dow Jones Industrial Average, which is centered on blue-chip stocks, closed at 47,885.97, down 228.29 points (0.47%) from the previous trading day. The S&P 500 Index, which focuses on large-cap stocks, fell by 78.83 points (1.16%) to 6,721.43, while the tech-heavy Nasdaq Index dropped 418.139 points (1.81%) to 22,693.323.

By stock, Oracle plunged 5.4%. Broadcom and AMD declined by 4.48% and 5.29%, respectively. Nvidia fell 3.81%, and Alphabet, Google's parent company, dropped 3.21%. Paramount Skydance slipped 5.42% after Warner Bros. Discovery advised its shareholders to reject the company’s hostile takeover bid.

A report by the Financial Times (FT) of the United Kingdom triggered the decline in Oracle and other AI-related stocks. According to the FT, global private equity firm Blue Owl Capital had been in discussions with Oracle to build a 1GW data center for OpenAI in Saline Township, Michigan, but recently decided not to fund the project. The negotiation reportedly broke down due to Oracle’s increasing debt and the burden of massive investment spending in the AI sector. In addition, a Bloomberg report last week that Oracle may delay some OpenAI-related projects until 2028 further amplified the impact of the FT report.

This report came as global big tech companies are rushing to build data centers to meet rising AI demand, while investors are increasingly concerned about how these projects are being financed. Some investors point out that the structure in which companies rely on private equity funds to build data centers and then sign long-term lease contracts, rather than investing directly, could lead to future financial risks.

Jack Ablin, Chief Investment Officer (CIO) at Cresset Capital Management, said, "AI remains a core investment theme driving the market, but fatigue is beginning to set in. Industry valuations are overstretched, infrastructure investment has increased at an unprecedented pace, and this kind of fervor is reminiscent of past speculative cycles." He added, "As AI margins peak and capital intensity rises, investors have started to move their funds into sectors where profit outlooks are clearer."

In addition to concerns over overheated AI investments, the stock market struggled to find upward momentum early in the session due to mixed signals from employment indicators. According to the November employment report released the previous day by the U.S. Bureau of Labor Statistics (BLS) under the Department of Labor, nonfarm payrolls increased by 64,000, surpassing the market expectation of 45,000 compiled by Dow Jones. This marks a turnaround from October, when nonfarm payrolls fell by 105,000 due to federal government workforce reductions.

However, despite the increase in employment, the unemployment rate rose from 4.4% in September to 4.6% in November, marking the highest level in four years and two months since September 2021. Although a slowdown in the labor market has been confirmed, there are no signs of a collapse, making investors’ forecasts for the future interest rate path even more uncertain.

Investor attention is now shifting to the Consumer Price Index (CPI) for November, which will be released on December 18. The market expects both headline CPI and core CPI to have risen by 3.1% year-on-year, a slight increase from September’s 3.0%.

There were also public comments from U.S. Federal Reserve officials regarding the direction of future monetary policy. Fed Governor Christopher Waller stated that the current benchmark interest rate is 1 percentage point higher than the neutral level and expressed the view that further rate cuts are needed. However, he added, "Since inflation is still high, there is no need to rush and we can take our time." Waller outlined a scenario in which inflation continues to slow through 2026.

U.S. Treasury yields remained flat. The yield on the 10-year Treasury, the global benchmark for bond yields, held steady at 4.15%, while the yield on the 2-year Treasury, which is sensitive to monetary policy, was unchanged at 3.48%.

International oil prices rebounded from the lowest level in nearly five years recorded the previous day, after U.S. President Donald Trump ordered a full blockade of oil tankers traveling to and from Venezuela. West Texas Intermediate (WTI) crude settled at $55.94 per barrel, up $0.67 (1.21%) from the previous trading day. The previous day, WTI fell below $55 per barrel during the session for the first time since February 2021, amid optimism over an end to the war in Ukraine and expectations of increased supply. Brent crude, the global benchmark, also rose by $0.76 (1.29%) to close at $59.68 per barrel compared to the previous day.