Technology jitters cast shadow over market sentiment

While Wednesday's Fed decision delivered the anticipated 25-bp rate cut, market attention swiftly pivoted to a more pressing concern: the sustainability of AI valuations.

Oracle's earnings highlight AI infrastructure risks

The majority of yesterday’s limelight fell on Oracle (ticker: ORCL). Despite stronger-than-expected Q3 earnings, investor focus zeroed in on the company's escalating capital expenditure forecasts and the composition of its impressive revenue backlog.

Oracle disclosed over US$500 billion in contracted future revenue. Yet beneath this lies a concentration risk that rattled the market – approximately US$300 billion of this backlog stems from a contract with OpenAI. Consequently, Oracle's impressive-looking backlog might not be as solid as it appears – a huge chunk depends on OpenAI somehow coming up with US$300 billion over time.

While broader market indexes staged a rebound across the board, gains were most notable in the Dow Jones Industrial Average, which rallied more than 600 points, or 1.3%. The S&P 500 ended the session moderately higher by 0.2%, with the tech-heavy Nasdaq etching out a modest gain of 0.4%.

This divergence signals a defensive rotation, with investors gravitating toward established blue-chip names whilst exhibiting growing caution toward speculative technology positions. The Magnificent Seven also settled the day lower, with Nvidia (ticker: NVDA) shedding around 1.6%.

Despite a somewhat reassuring Fed cut, AI concerns remain top of mind across the investing community. It clearly reflects growing unease about lofty valuations in AI stocks and whether infrastructure investments will deliver returns.

Bearish pennant for BTC, anyone?

Cryptocurrencies were largely muted yesterday, though Bitcoin briefly dipped back below US$90,000. Technically, BTC/USD remains entrenched in a downtrend and is currently forming a potential bearish pennant pattern, extended from the low of US$80,540 and a high of US$93,050.

In the commodities complex, precious metals continue to outperform. Gold rallied 1.2%, clocking levels not seen since late October, while Silver added 2.8% and refreshed yet another all-time high of US$64.31. Silver has been on a tear this year, up an eye-popping 120% YTD.

Day ahead

Aside from October UK GDP – which will land at 7:00 am GMT this morning – and a couple of Fed officials speaking later this afternoon, there is limited event risk of note.

However, mince pies and mulled wine will have to wait; next week welcomes a number of updates from the BoE, the ECB, and the BoJ. Additionally, we have the November US employment report to get our teeth into, as well as inflation reports from Canada, the UK, and the US for the same month.