Oracle's Huge AI Investments vs Weak Cash Flow Stalls Stocks
By Reuters | 11 Dec, 2025

As a key player in the aggressive global AI infrastructure buildout, Oracles' weak earnings on AI investments is seen by some as a reality check on the AI boom.

 World stocks stalled on Thursday as cloud computing giant Oracle sounded a warning for AI profitability, while bonds were firm and the dollar nursed losses after the U.S. Federal Reserve cut interest rates for a third meeting running.

Despite the Fed relief, Oracle had Wall Street pointing lower after reigniting jitters over stratospheric tech valuations by missing analysts' sales and profit estimates and flagging a $15-billion AI overspend.

The U.S. firm's shares sank 12% in pre-opening bell trading, pushing Nasdaq futures down 0.5% as other major AI players Nvidia, Microsoft and Amazon all dropped between 1% and 1.5%. 

Japan's Nikkei had lost almost 1% overnight too as SoftBank - a partner with Oracle on the U.S. Stargate data centre project - slumped more than 7.5% [.T].

A 2.5% drop for Germany's SAP also left Europe's tech indices facing a third straight day in the red, although the prospect of lower global interest rates meant there were gains to be had elsewhere. [.EU]

ORACLE AT CENTRE OF AI SPENDING DEBATE

Hargreaves Lansdown analyst Matt Britzman said Oracle has been at the epicentre of the AI spending debate, given that it lacks the mammoth cash flows of the likes of Google, Amazon and Microsoft.

"Markets quickly looked past the massive earnings beat, driven by a one-off asset sale, and focused on the rising capex and weak cash flows," Britzman said, adding it fanned broader concern that AI outlays aren't turning profits for firms as quickly as hoped.

Traders were otherwise still focusing on the global interest rate outlook after the Fed lowered its benchmark funds rate, as expected, by 25 basis points to 3.5%-3.75% in a 9-3 split decision.

Fed Chair Jerome Powell sounded balanced at a press conference, saying he didn't "think a rate hike is anyone's base case", while new wording on "the extent and timing" of further rate adjustments signalled a possible pause ahead.

That left interest rate futures with at least two rate cuts priced in for next year, undercutting the dollar and helping the euro <EUR=> break above $1.17 for the first time since October. [/FRX]

Indosuez Wealth Management CIO Alexandre Drabowicz said the bar for another U.S. rate cut in the coming months now looked quite high and would likely be determined by the health of the jobs market. 

"We see another cut in the first half of the year," he said, although looking beyond that was "too difficult" given that a new Donald Trump-appointed Fed chair will be in place by May. 

"For sure, it will be leaning towards more cuts," Drabowicz added, highlighting that Wednesday's 'dot plot' had also showed one Fed member - presumably recent Trump appointee Stephen Miran - had pencilled in another 1.5 percentage points worth of rate cuts for next year. 

"This is still an environment where we keep a cautious view on the U.S. dollar," Drabowicz added.

BONDS RALLY, DOLLAR SLIPS

Bonds caught a further tailwind as the Fed also announced it would start buying short-term Treasuries as soon as Friday to support liquidity.

Benchmark 10-year yields fell about 4 basis points to 4.12% with two-year U.S. yields down at 3.52%.

Germany’s 10-year yields, Europe's benchmark, dipped one basis point at 2.85%, having gone above 2.89% on Wednesday, their highest level since mid-March. [GVD/EUR]

Money markets had been volatile in recent weeks, leading to a premium on short-term rates as liquidity was stretched.

"The market was already prepared, curves had already steepened and it was almost all priced in," Fixed income portfolio manager at Generali Investments, Fabrizio Viola, said.

"But if I had to put an underweight on any sector for the start of next year it would probably be the IT sector," he added, pointing to examples like Oracle's strains. 

DOLLAR SLIDES 

In foreign exchange markets, trade and risk-sensitive currencies such as the Australian <AUD=> and New Zealand <NZD=> dollars slipped, but the yen was firm with eyes on next week's Bank of Japan meeting where a rate hike is expected.

The yen has reversed a recent fall and rose to 155.6 per dollar in European trade on Thursday. The euro struck a two-month high of $1.1707 as it enjoyed an extra boost from comments by European Central Bank President Christine Lagarde that another upgrade in European growth projections was possible.

"The next big cue will be the November (U.S.) non-farm payrolls release on 16 December and whether a soft number can keep market pricing of two further rate cuts in 2026 intact," analysts at ING said in a note.

"Seasonally, the dollar tends to weaken into year-end and with Fed event risk now out of the way, EUR/USD could have that run-up to 1.1800 after all."

Oil prices also eased after gaining on Wednesday in the wake of the United States' seizure of a sanctioned oil tanker off Venezuela's coast, which escalated tensions with Caracas, raising concern over possible supply disruptions.

Brent and U.S. crude futures were down roughly 1.2%, fetching $61.55 and $57.80 a barrel, while gold and bitcoin both ticked lower as well to $4,212 an ounce and $90,057 respectively.

(Additional reporting by Tom Westbrook in Hong Kong; Editing by Joe Bavier and Andrew Heavens)