Oracle’s huge AI bets are spooking Wall Street—a 12% plunge wiped out the market’s early gains

Market Overview - Most U.S. stocks are rising, but Oracle's significant drop is impacting Wall Street as investors question the return on its AI technology investments [1][2] - The S&P 500 fell 0.4%, while the Dow Jones Industrial Average rose by 233 points (0.5%) and the Nasdaq composite decreased by 0.7% [1] Oracle's Performance - Oracle's stock dropped 14.5% despite reporting better-than-expected profits for the latest quarter, with a revenue growth of 14% that fell short of expectations [2][3] - Analysts expressed surprise at the extent of Oracle's planned AI investments for the fiscal year, raising concerns about the company's ability to finance these expenditures [3] AI Industry Impact - Doubts regarding Oracle's AI spending are affecting the broader AI industry, which has seen substantial investment but is experiencing volatility [4] - Nvidia, a key player in the AI sector, saw its stock fall by 2.8%, contributing to the S&P 500's decline [4] Treasury Yields and Economic Indicators - Lower Treasury yields, which fell to 4.10% from 4.13%, are encouraging higher stock prices as they reduce interest payments on government bonds [5][6] - A report indicating a higher-than-expected increase in unemployment benefit applications suggests potential rising layoffs, impacting market sentiment [6] Federal Reserve Actions - The Federal Reserve's recent interest rate cuts, including a third cut this year, are viewed positively by Wall Street as they can stimulate economic growth [7] Other Company Performances - The Walt Disney Co. gained 2.1% following a partnership with OpenAI to utilize its characters for social video generation, alongside a $1 billion investment in OpenAI [8] - Oxford Industries' stock fell 15.1% due to weaker-than-expected holiday shopping forecasts, while Vera Bradley's stock dropped 26% after reporting larger-than-expected losses [9] International Market Trends - European indexes saw gains, while Japan's Nikkei 225 index fell by 0.9%, influenced by a significant drop in SoftBank Group Corp., a major AI investor [10]