The S&P 500 closed lower Wednesday, extending its recent decline as slide in Oracle and Nvidia soured investor sentiment on the AI trade.
At 4:00 p.m. ET, the Dow Jones Industrial Average fell 228 points, or 0.5%, the S&P 500 index fell 1.2%, and the tech-heavy NASDAQ Composite fell 1.8%.
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Oracle falls on AI datacenter concerns Shares of tech giant Oracle Corporation (NYSE:ORCL) fell more than 5% on Wednesday on reports Blue Owl Capital will not back the company’s $10 billion AI datacenter in Michigan, which is expected to be used for OpenAI.
Blue Owl had been in talks with lenders and Oracle over a potential investment in the 1-gigawatt data center project in Saline Township, but those discussions ultimately stalled.
Shares of Oracle have been the poster child for AI datacenter buildout concerns, as investors worry about the amount of capital needed for the projects, their ultimate payback, and the circular nature of the deals.
Shares of Oracle are down over 41% over the past three months but remain up 14% year-to-date.
The negative update weighed on sentiment across AI stocks with Broadcom Inc (NASDAQ:AVGO) and NVIDIA Corporation (NASDAQ:NVDA) leading to the downside.
Fed still has room to cut - Waller Federal Reserve Governor Christopher Waller said Wednesday that the U.S. central bank still has room to cut interest rates amid concerns that the job market has softened.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. “I still think we’re probably, you know, maybe we’re 50 to 100 basis points off of neutral," which means the Fed still has room to cut interest rates, Waller said at the Yale School of Management CEO Summit in New York.
Given the outlook, "there’s no rush to get down" on interest rates, Waller said, and "we just can steadily, kind of bring the policy rate down towards neutral" amid what’s likely to be an economy with moderating inflation.
The Fed cut interest rates by 25 basis points last week, citing a desire to prop up a faltering labor market despite indications of sticky inflationary pressures.
Data this week has pointed to a struggling jobs market, as although nonfarm payrolls grew more than expected in November, this was accompanied by an increase in the jobless rate to a four-year high.
The rise in payrolls was also much smaller than a sharp decline seen in prior months.
Other readings also flagged some cooling in the U.S. economy. Purchasing managers index data for December showed growth in both manufacturing and services was lower than expected, while delayed retail sales data for October showed growth cooling from the prior month.
Waller’s comments are of particular interest following a Wall Street Journal report that President Donald Trump is set to interview him for the next Fed Chair. Trump has previously noted that former Fed Governor Kevin Warsh and White House economic adviser Kevin Hassett are his top picks to replace Jerome Powell, whose term at the helm of the Fed is scheduled to end in May.
