Heavy AI spending, financed by debt, with unknown revenue timelines
On Wednesday, the Federal Reserve delivered an anticipated rate cut, and Fed Chair Jerome Powell hinted at further easing in 2026 — a gesture that lifted Wall Street toward record territory. Yet across the Pacific, the morning brought a more complicated inheritance: Oracle's disappointing earnings, heavy with the weight of unproven AI ambitions, sent tremors through Asian tech stocks, reminding markets that optimism borrowed against uncertain futures carries its own kind of interest.
- The Fed's rate cut was expected, but Powell's openness to further cuts in 2026 was the real spark — sending the S&P 500 to within reach of its all-time high.
- Oracle's 11.5% aftermarket collapse exposed a deeper anxiety: tech giants are spending borrowed billions on AI infrastructure with no clear path to returns, and investors are losing patience.
- Asian markets fractured under the weight of Oracle's warning, with SoftBank falling 7.7%, Taiwan's Taiex dropping 1.3%, and Shanghai and Seoul both sliding — only Australia and India held their ground.
- The Bank of Japan's looming rate hike decision and China's weakening credit data cast a shadow over regional sentiment, leaving investors reluctant to commit fresh capital.
- Powell acknowledged the Fed's core dilemma — a cooling labor market against rising inflation — but declared rates had reached neutral, signaling a pause rather than a promise of relief.
The Federal Reserve cut its benchmark interest rate on Wednesday, as markets had long anticipated. What moved Wall Street wasn't the cut itself — already priced in — but what Jerome Powell said next. His suggestion that the Fed might cut again in 2026 sent a quiet wave of optimism through trading floors, lifting the S&P 500 to 6,886.68, just below its October record. The Dow gained 1%, and the Nasdaq edged up 0.3%.
Thursday morning told a different story across Asia. Tokyo's Nikkei fell 0.9%, pulled down in part by SoftBank's 7.7% drop, a reflection of investor unease over the conglomerate's deep exposure to artificial intelligence bets. Hong Kong's Hang Seng slipped 0.1% even as its monetary authority followed the Fed in cutting borrowing costs to their lowest level since 2022. Shanghai fell 0.7%, Seoul's Kospi declined 0.6%, and Taiwan's Taiex lost 1.3%. Only Australia and India managed modest gains.
Much of the regional anxiety traced back to Oracle. The cloud computing giant missed earnings expectations, but the deeper concern was its strategy: heavy AI infrastructure spending, financed through debt, with no clear timeline for returns. Analyst Ipek Ozkardeskaya of Swissquote captured the mood — investors were growing wary of major tech companies pouring borrowed capital into AI with uncertain payoffs. That fear traveled quickly across a region where companies like SoftBank have staked enormous sums on the same bet.
Adding to the pressure, traders in Tokyo were already bracing for the Bank of Japan to raise rates the following week. In China, caution prevailed ahead of November credit data, with October's figures having already disappointed — new yuan loans had fallen sharply, signaling weakening consumer demand.
Back on Wall Street, bright spots emerged. Energy company GE Vernova surged 15.6% after raising its revenue outlook and doubling its dividend. Palantir and Cracker Barrel also gained. But oil prices slipped, and the Oracle shock tempered the broader mood. Powell, for his part, was candid about the Fed's predicament: a cooling job market and rising inflation pulling in opposite directions, with rates now at a neutral level that neither stimulates nor restrains. It was a signal to pause — encouraging for those hoping for more cuts, but cold comfort for those watching the AI spending wave build without a clear shore in sight.
The Federal Reserve did what markets expected on Wednesday: it cut its benchmark interest rate. What came next was less predictable. Wall Street climbed toward its record high, with the S&P 500 gaining 0.7% to close at 6,886.68, just shy of the peak it set in October. The Dow Jones jumped 1%, and the Nasdaq rose 0.3%. But the real signal came not from the rate cut itself—investors had already priced that in—but from what Fed Chair Jerome Powell said afterward. His comments suggested the central bank might be open to cutting rates again in 2026, a prospect that sent a ripple of optimism through trading floors.
Across Asia on Thursday morning, however, that optimism fractured. Markets opened mixed, pulled in different directions by competing forces. In Tokyo, the Nikkei 225 fell 0.9% to 50,148.82, dragged down partly by SoftBank Group, which dropped 7.7% on concerns about its heavy exposure to artificial intelligence investments. Hong Kong's Hang Seng shed 0.1% to 25,513.38 despite the Hong Kong Monetary Authority following the Fed's lead and cutting its own borrowing costs to 4.00%, the lowest since October 2022. Shanghai's composite index fell 0.7% to 3,873.32. South Korea's Kospi declined 0.6% to 4,110.62, with chip maker SK Hynix falling 3.8% after the country's stock exchange issued warnings about its sharp gains this year. Taiwan's Taiex closed 1.3% lower. Only Australia's S&P/ASX 200 and India's BSE Sensex managed gains, rising 0.2% and 0.4% respectively.
The culprit behind much of the regional weakness was Oracle. The software and cloud computing giant reported earnings that fell short of expectations, and the market's reaction was swift and severe: its shares sank 11.5% in aftermarket trading. The real concern wasn't the miss itself but what it revealed about the company's strategy. Oracle has been spending heavily on artificial intelligence infrastructure, financed partly through debt, with no clear timeline for when that spending would translate into revenue. As analyst Ipek Ozkardeskaya of Swissquote put it, the report confirmed what investors had begun to fear: that major tech companies were pouring vast sums into AI with borrowed money and uncertain returns. That anxiety rippled across Asia's technology sector, where companies like SoftBank have made enormous bets on AI's future.
Regional central banks added to the pressure. In Tokyo, traders were bracing for the Bank of Japan to raise its own interest rates at a meeting scheduled for the following week, a prospect that weighed on local equities. In China, sentiment remained cautious ahead of the release of November credit data. October's numbers had already disappointed, with new yuan loans falling sharply and missing forecasts, a sign that consumer demand was weakening. That backdrop made investors hesitant to commit fresh capital to Chinese stocks.
On Wall Street, the picture was brighter for some. GE Vernova, an energy company, soared 15.6% after raising its revenue forecast through 2028, doubling its dividend, and expanding its stock buyback program. Palantir Technologies added 3.3%, and Cracker Barrel Old Country Store rose 3.5%. But the broader momentum was tempered by the Oracle shock and by falling oil prices. U.S. benchmark crude slid 31 cents to $58.15 per barrel, while Brent crude lost 34 cents to $61.87.
Powell's comments had offered a window into the Fed's thinking. He acknowledged the central bank faced a genuine dilemma: the job market was cooling while inflation was pushing upward, and any attempt to address one problem with interest rates typically worsened the other in the short term. For the first time in this rate-cutting cycle, Powell said, interest rates had returned to a neutral level—neither stimulating nor restraining the economy. That gave the Fed room to pause and watch the data before deciding on its next move. For investors hungry for more cuts, it was encouraging. For those worried about the sustainability of corporate spending on unproven technologies, it offered little comfort.
Citas Notables
The report confirmed concerns around heavy AI spending, financed by debt, with an unknown timeline for revenue generation.— Ipek Ozkardeskaya, Swissquote
Interest rates are now at a level where they're pushing neither inflation nor the job market higher or lower, giving the Fed time to hold and reassess.— Fed Chair Jerome Powell
La Conversación del Hearth Otra perspectiva de la historia
Why did Oracle's earnings miss hit Asian tech stocks so hard? It's one company's report.
Because Oracle is a bellwether. When the company that's supposed to be leading the AI boom reports weak numbers and admits it's spending heavily on AI with no clear revenue timeline, it forces investors to ask whether everyone else is doing the same thing—just with borrowed money.
So the Fed cut rates, which should help stocks. Why didn't that lift Asia?
The Fed cut rates, yes, but Asia has its own problems. Japan's central bank is about to raise rates. China's credit data is weak. And now there's this gnawing doubt about whether the AI spending spree makes sense. A rate cut in Washington doesn't fix that.
Powell said rates are now neutral. What does that mean for investors?
It means the Fed isn't trying to juice the economy anymore, but it's also not trying to cool it down. It gives them time to see what happens next with jobs and inflation before they move again. For some investors, that's permission to hope for more cuts. For others, it's a signal to be cautious.
Why did SoftBank fall so much in Tokyo?
SoftBank has bet enormous sums on AI companies and infrastructure. When Oracle—a company that's supposed to know what it's doing with AI—admits its spending isn't paying off yet, it raises questions about whether SoftBank's bets will either.
Did anything go right in Asia that day?
Australia's mining and gold stocks did well, and unemployment came in better than expected. India's market rose slightly. But the weight of the Oracle news and the regional rate-hike expectations overwhelmed those gains.