Investopedia Markets News (all except PF)

Al Drago / Bloomberg via Getty Images

Federal Reserve Chair Jerome Powell's leadership term ends next year, and it may upend the future of monetary policy.

Key Takeaways

• Federal Reserve Chair Jerome Powell only has three policy meetings left before his term ends in May.
  
• Powell's impending replacement makes it more challenging to predict future interest rates, as new leadership may alter the Fed's strategy.
  
• Financial markets are pricing in lower future interest rates than Fed officials have forecast, likely because President Donald Trump's nominee would push for lower rates.
  

Everything the Federal Open Market Committee said and did at its meeting Wednesday came with a huge asterisk: New leadership could push the central bank to move its key interest rate in a different direction in a few months. 

The Fed's policy committee voted to lower the fed funds rate by a quarter point this week for the third consecutive meeting, aiming to stabilize the faltering job market by reducing borrowing costs. It was one of the last scheduled meetings of the Federal Open Market Committee before Chair Jerome Powell's term ends in May, and investors and economists have been speculating about what direction the central bank will take under new, Trump-appointed leadership.

That fact came up several times at Wednesday's post-meeting press conference. A question about whether the impending end of his term hindered Powell's ability to do his job or change his thinking prompted his shortest answer of the conference: "No."

Nonetheless, the leadership change complicates Powell's job of informing the public about the future course of the federal funds rate, which affects borrowing costs on all kinds of loans.

What This Means For The Economy

As Powell's term nears its end, investors will likely increasingly weigh the opinion of the incoming Fed chair—whoever that may be—more heavily than that of Powell when it comes to future interest rate policy.

Market Watchers Move On

The impending leadership change has altered how financial market participants view the future of the Fed and its interest rate policies. On Wednesday, Fed officials projected they would cut rates by just a quarter-point in 2026, down to a range of 3.25% to 3.5%.

However, traders are pricing two quarter-point cuts as the most likely scenario, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data. That would be more in line with President Donald Trump's often-stated demands for sharply lower interest rates.

Kevin Hassett, a top economic advisor to Trump and reported front-runner for the job, has recently been pushing for more rate cuts and could continue that line of thinking if and when he becomes chair.

"The elephant in the room is, we will have a new Fed Chair in May and given Trump's very vocal desire for lower rates, the market is pricing in an additional rate cut compared to the Fed's projections. This is not surprising," John Luke Tyner, portfolio manager and head of fixed Income at Aptus Capital Advisors, wrote in a commentary.

Other Factors Could Also Distort the Outlook

The Fed's projections are also less reliable because the government shutdown has delayed crucial economic data on inflation and employment. The Fed relies on reports from the government's statistical agencies as it pursues its dual mandate of keeping inflation low and employment high.

"The Fed’s guidance probably tells us less than usual about the interest rate outlook, for two big reasons," Bill Adams, chief economist at Comerica, wrote in a commentary. "First, they know less than usual about the current state of the economy because the shutdown delayed the release of economic statistics. Second, the Fed’s guidance doesn’t account for how its approach will change after Chair Powell’s term ends in May."

In addition to the change of Fed chair, there will be a further shakeup of the 12-member voting committee that sets interest rates. Four seats rotate annually among presidents of 11 regional Fed banks. New York's Fed president has a permanent seat on the board. Some economists said the new voters will be more "hawkish," or less inclined to vote for lower interest rates, than those they are replacing.

Another potential wild card is a Supreme Court case that will decide whether Trump can fire Fed Governor Lisa Cook, which could potentially open another spot on the committee for Trump to fill with someone friendly to his policies. The outcome of that case will determine whether the Fed retains its traditional independence from direct White House control.

Given all that, in his last few meetings, some speculated that Powell may prioritize sending messages besides what interest rates are likely to be in a few months.

"Fed Chair Powell’s job in his final few months at the helm is to ensure central bank independence and credibility," wrote Heather Long, chief economist at Navy Federal Credit Union. "He needs to keep his options open for January and March and push back on assumptions that a cut is necessary.”

Chip Somodevilla / Getty Images

Federal Reserve Chair said Wednesday that the risks to inflation, which remains above the Fed's target rate, are "tilted to the upside."

Key Takeaways

• Inflation pressures are likely to persist in early 2026 owing to tariffs, Federal Reserve Chair Jerome Powell said after yesterday’s meeting of the central bank's policy committee.
• While the Federal Reserve cut its benchmark interest rate this week, it will be closely watching for the impact from tariffs on prices as it evaluates its next actions.

Inflation is likely to get worse before it gets better, and the Federal Reserve will be keeping a close eye on prices and tariffs next year before making its next move on interest rates, Fed Chair Jerome Powell warned yesterday.

“In the near term, risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation,” Powell said after the Fed moved Wednesday to reduce interest rates for the third straight meeting.

While the Fed sees inflation moderating overall next year, price pressures could remain high as the impact of President Donald Trump’s tariffs is just beginning to be felt, Powell said. “What's happening here is services inflation coming down, and that's offset by increases in goods, and that goods inflation is entirely in sectors where there are tariffs,” Powell said. 

Why This is Important for the Economy

Tariff-driven inflation could affect the Fed’s interest-rate path, which influences borrowing costs and economic activity. Persistent price pressures may mean interest rates will stay higher for longer, which could slow growth and alter financial market trends.

Fed Sees Inflation Cooling Later in 2026

According to the Summary of Economic Projections released Wednesday, Fed officials see the Personal Consumption Expenditures (PCE) price index, the central bank's preferred inflation gauge, falling to 2.4% in 2026, compared to the September forecast of 2.6%. The projection for “core inflation", which excludes volatile food and energy costs, is also down slightly.

But before that, inflation could move higher, Powell warned, as it can be nine months or more before Trump’s tariffs can be fully factored into prices. The U.S. initiated a round of "reciprocal tariffs” in early August that raised import taxes on a number of trading partners.

“Inflation from goods should peak in the first quarter or so,” Powell said. “If there are no new tariffs that are being announced that will take nine months to get fully in …. then you should start to see that coming down in the back half of next year.”

The Fed went into this week's meeting without much fresh inflation data to analyze, as most official economic reports were delayed or canceled owing to the government shutdown this fall.

“A reasonable base case is that the effects of tariffs on inflation will be relatively short-lived, effectively a one-time shift in the price level,” Powell said Wednesday. “Our obligation is to make sure that a one-time increase in the price level does not become an ongoing inflation problem.”

Fed May Stand Pat as It Aims for Inflation Target

The Federal Reserve has two congressionally mandated goals: keeping inflation low and the job market strong. Inflation has remained above the Fed’s target rate of 2%, with the most recent PCE report showing inflation at 2.8% in September. Meanwhile, the labor market is also showing weakness, which has been a key factor in the Fed's recent decisions to cut rates.

It could be a while before the Fed cuts rates again, as language in its official statement indicated they were poised to hold rates at current levels for a few months to watch for the impact of inflation. Two members of the board voted against the rate cut, signaling that they thought the move could worsen price pressures.

Fed officials projected making just one further quarter-point rate cut next year, according to the Summary of Economic Projections. Financial market participants, meanwhile, aren't pricing in a greater than 50% chance the Fed will cut rates before its late-April meeting, according to the CME Group's FedWatch tool.

“Inflation must significantly cool for the committee to cut more than two times in 2026,” wrote Jeffrey Roach, chief economist for LPL Financial, who projected that the Fed wouldn’t move to lower interest rates again until the 2026 second quarter.

The outlook for rates will be heavily dependent on economic data in the coming months, and could be affected by leadership changes at the Fed. President Donald Trump has urged the Fed to cut interest rates and has been highly critical of Powell, whose term as chair expires in May.

Sha Hanting / China News Service/ VCG via Getty Images

Federal Reserve Chair Jerome Powell speaks during a press conference on Dec. 10.

Key Takeaways

• Fed officials remain sharply divided on the outlook for 2026, with forecasts ranging from no rate cuts to several, highlighting growing policy uncertainty as new economic data arrives.
• The next Fed chair will inherit a committee with a strong hawkish bloc, even as officials project steady growth, easing inflation, and a slower pace of rate cuts after 2025.

The big divisions at the Federal Reserve show no signs of stopping next year, if officials’ brand-new quarterly projections are any guide.

While the Fed is penciling in one cut in 2026, that masks a vast dispersion in the individual forecasts from the central bank’s officials. That projection, after all, is the median view from 19 different policymakers.

Seven Fed officials are leaning against cutting rates in 2026—a minority but a sizable hawkish camp nonetheless. Eight others see at most two cuts next year, while four officials are eyeing more aggressive action.

It’s not clear which camp will prevail as new economic data comes out. That includes some reports that were delayed thanks to the government shutdown.

“All eyes will be on whether that fresh data can help forge a new consensus, or only widen the existing divide,” wrote Cory Stahle, an economist at Indeed.

Why This Matters

Divisions inside the Fed signal growing uncertainty around borrowing costs, shaping expectations for consumers, businesses, and investors.

It’s a division that Fed Chair Jerome Powell’s replacement will have to grapple with next year. Powell’s four-year term as Fed chair is up in May, giving President Donald Trump a chance to name his replacement. 

Trump has long wanted sharply lower interest rates—he said Wednesday the rate cut could’ve been “at least doubled.” Whoever he picks to run the Fed is likely to be sympathetic to those arguments, even if they’re not wedded to Trump’s views.

That person, however, will need to work within the confines of a 19-member committee that has a large hawkish contingent. The next Fed chair “will have a hard time corralling the Committee’s participants to agree to further reductions,” wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

Wednesday’s 25-basis-point rate cut is the Fed’s third this year and brought the federal funds rate to a target range of 3.5% to 3.75%. Rates are down from a recent peak of 5.25% to 5.50% in 2023.

A Sunnier Outlook

Some economists thought the FOMC’s forecasts might show officials penciling in two cuts in 2026, not one. If the outcome seemed a bit hawkish, it may be partly due to Fed officials’ sunnier view of the economy.

The Fed’s median forecasts showed they see real GDP growth of 2.3% in 2026, significantly higher than the 1.8% pace they had forecast in September. It’s also more optimistic considering the somewhat sluggish GDP growth they anticipate for 2025: 1.7%.

Asked about the more optimistic forecasts, Powell pointed to “resilient” consumer spending, investments for data centers and fiscal policy remaining “supportive” in 2026.

“It looks like the baseline would be solid growth next year,” Powell said. 

Officials also don't see major signs of the job market faltering. Fed officials expect the unemployment rate to rise to 4.5% by year-end, up a notch from the 4.4% rate in September. However, they predict the jobless rate will turn back down to 4.4% by the end of 2026. 

Fed officials also see inflation continuing to come down toward the Fed’s 2% goal—and at a slightly faster pace than they forecasted in September. 

Their forecasts suggest the Fed’s preferred inflation gauge may decelerate to 2.5% in 2026, marginally better than their September forecasts of 2.6%. It’s a sign that despite endless tariff headlines, prices aren’t rising at an alarming pace.

The Hawks’ Silent Dissents

One factor that drew attention heading into the FOMC meeting was the possibility of the “silent dissent.”

The dissents among three Fed officials weren’t so silent. Fed Governor Stephen Miran, Trump’s newest Fed appointee, voted against Wednesday’s action and wanted a deeper cut. The two other dissenting votes argued the Fed should’ve kept rates unchanged.

However, there was clearly more disagreement than the vote total suggests. The Fed’s forecasts showed six officials agreed with the hawkish perspective of keeping rates steady, even if they didn’t vote for that view. 

Not all FOMC officials vote at each meeting, since the 12 regional Fed presidents rotate into voting spots each year. Some Fed officials may also decide to vote with the consensus view, even if they disagree with the outcome.

Even so, it’s clear that the “ranks of the hawks are growing,” wrote Preston Caldwell, chief U.S. economist at Morningstar.

Cuts Still Likely

Analysts widely expect the Fed to pause its rate cuts in January—but see the central bank continuing with reductions later in the year.

The Fed still “maintains an easing bias,” wrote Wells Fargo economist Sarah House, adding that the Fed is likely to cut rates by 25 basis points again in March and June. 

“Our base case remains that the current easing cycle is not over yet but rather that it is entering a slower phase,” House wrote.

The central bank is in a “tricky environment,” she wrote, flagging that key reports such as November’s jobs report were still missing ahead of the Fed meeting. The data the Fed did have “continue to indicate some tension” between the Fed’s two goals of maximum employment and price stability, she added. 

The job market has shown some signs of weakening, helping the case for quicker rate cuts. On the other hand, inflation remains above the Fed’s 2% goal, which argues for a halt in rate cuts.

Powell flagged that tension as a key factor why the Fed appears more divided than in the past, telling reporters, “it’s a very challenging situation.”

“Everyone around the table at the FOMC agrees that inflation is too high and we want it to come down, and agrees that the labor market has softened and that there's further risk,” Powell said.

The difference, he said, is which risk Fed officials place a greater weight to and how incoming data changes those calculations.

“The discussions we have are as good as any we've had in my 14 years at the Fed,” Powell said. 

Justin Sullivan / Getty Images

Oracle shares plunged on Thursday amid concerns about its AI-related borrowing and revenue prospects.

Key Takeaways

• Oracle and other AI stocks tumbled on Thursday after the company reported surging expenditures related to its AI data center buildout, reinforcing concerns on Wall Street about out-of-control, debt-fueled spending on the fledgling technology.
• The pressure on Oracle's shares may signal increasing investor reluctance to assume the best outcomes from AI even for big tech companies that say AI business is powering big revenue growth.

What happens when investors start turning a microscope on promises of AI-driven gold?

That question was hammering AI stocks on Thursday after tech giant Oracle (ORCL) last night reported results that did little to resolve Wall Street’s concerns about an AI bubble inflated by debt-laden investments. The answer wasn't pretty: Oracle's shares—which which doubled in value between January and early September—were down nearly 15% in recent trading, touching six-month lows.

Oracle wasn't the only AI-powered stock to feel the pressure today. Nvidia (NVDA), Palantir (PLTR), and Broadcom (AVGO) were all down more than 3% in recent trading. Roundhill's Magnificent 7 ETF, or MAGS, was off a bit less than 1% while the S&P 500 treaded water and the blue-chip Dow industrials climbed.

The market’s reaction to Oracle’s earnings could reflect a growing desire among investors to be shown, not told of, AI’s commercial benefits. "Investors are no longer rewarding AI narratives without proof of execution,” said Shay Boloor, Chief Market Strategist at Futurum Equities, in an interview.

Why This Is Important

Oracle isn't expected to start realizing much of its AI-related revenue until next year. For that reason, Oracle stock's performance in recent months has been driven primarily by Wall Street's optimism—and pessimism—about the outlook for the business of AI. Today, pessimism was the driving force behind its shares.

Oracle shocked Wall Street with its fiscal first quarter earnings report in September, when the company said its backlog grew more than $300 billion, sending its shares 36% higher in a single day and briefly making Larry Ellison the world's richest person—and the company a poster child for the tech boom. The company on Wednesday said its backlog increased nearly $70 billion last quarter to $523 billion. 

But ever since September’s report investors have been concerned that OpenAI, the unprofitable maker of ChatGPT, accounts for too much of Oracle’s future revenue. Executives addressed those fears on Wednesday, highlighting new contracts with Meta Platforms (META) and Nvidia, and said cloud resources could be reassigned to new customers in a matter of hours.

Investors are also worried about the size of Oracle’s AI investments, and how it’s paying for them. The company’s capital expenditures totaled $12 billion last quarter, $4 billion more than Wall Street expected. Oracle also raised its full-year capex target to $50 billion from $35 billion. 

“Oracle is taking on the most aggressive capex plan in the industry and building a data-center footprint that looks oversized relative to its revenue base,” said Boloor in a Thursday note.

"Investors may be increasingly losing confidence in Oracle's ability to convert this large (and still expanding) backlog into durable, profitable revenue streams,” said Morgan Stanley analysts. Bank of America analysts said investors were acting "skittish"; William Blair said it was becoming a "show-me story."

Oracle is borrowing heavily to finance its data center buildout. It sold $18 billion of debt in September in one of the largest-ever bond sales by a tech company. Investors have in recent months bid up Oracle’s credit default swaps—effectively, insurance against the company defaulting on its debt—and that trend continued Thursday. Oracle's management on Wednesday assured Wall Street that it will need to borrow less, “if not substantially less,” than analysts are forecasting.

While much of today's pullback was due specifically to Oracle's report, market watchers—including, for example, Bill Gates—are increasingly suggesting that investors can't just throw a dart blindly and hit a surefire AI winner.

 Gilbert Flores / Variety / Getty Images

Disney CEO Bob Iger told CNBC Disney wants to participate in the "dramatic growth" of AI

Key Takeaways

• Disney and OpenAI on Thursday announced a three-year licensing agreement to bring Disney, Star Wars, and Marvel characters to OpenAI's image and video generation tools.
• Disney will also invest $1 billion in OpenAI as part of the deal.

Darth Vader, Captain America, and Mickey Mouse are coming to ChatGPT.

The Walt Disney Company (DIS) and OpenAI announced a three-year licensing deal Thursday to make Disney characters available through the ChatGPT maker's image and video generation tools, with Disney also investing $1 billion in OpenAI.

Starting early next year, users of the ChatGPT image generator and OpenAI's Sora short-form video platform will be able to use over 200 Disney, Star Wars, Pixar, and Marvel characters in their content. Disney said it also plans to make some of the Sora-generated user videos available for Disney+ users to watch on its streaming service.

Disney CEO Bob Iger told CNBC in a televised interview following the announcement that the agreement is seen giving Disney “a way in” to AI and could help expand its reach with younger consumers.

Disney wants to "participate in the rather dramatic growth rather than just watching it happen and essentially being disrupted by it," Iger said.

Why This Matters to Investors

Many publishers, studios, and content creators have responded to the rapid rise of AI chatbots by partnering with their makers as Disney is doing with OpenAI, or suing over allegations of illegal use of copyrighted material like Disney has previously done with AI image generation platform Midjourney.

Iger said that the OpenAI deal does not include the voices of the characters, or the name, image, and likeness of the original actor, which he said means it "does not in any way represent a threat to the creators" or actors who played the characters. He also suggested the deal is exclusive for only part of the three-year timeline, potentially allowing Disney to make similar licensing deals with other AI companies in the future.

OpenAI CEO Sam Altman said in the interview alongside Iger that OpenAI plans to work with Disney to establish guardrails preventing videos with inappropriate content from being generated involving the Disney characters.

The deal comes not long after Disney sent a cease and desist letter to Alphabet's (GOOGL) Google, alleging that the maker of the Gemini chatbot and Nano Banana Pro image generator used copyrighted material to train its models, according to CNBC. Disney and Google did not respond to an Investopedia request for comment on the letter in time for publication.

Iger told CNBC that Disney will wait to see how Google responds before deciding if the company needs to escalate legal action.

Disney shares were up about 1% in recent trading, leaving them less than 1% below where they started the year.

CHARLY TRIBALLEAU / AFP via Getty Images

AI stands to boost the U.S. economy, Vanguard said, but it doesn't guarantee stellar long-term returns

Key Takeaways

• Vanguard expects U.S. stocks to produce 4% to 5% average annualized returns over the next five to 10 years.
• The firm's bear case for AI: The U.S. economy experiences "anemic growth reminiscent of the decade" after the 2008 financial crisis.

Artificial intelligence could completely change the way the world works. It still may not do much for stock portfolios.

Vanguard said AI stands to be a transformative technology and boost the U.S. economy, but the asset manager still forecasts long-term returns—single-digits over the next decade—that might represent a wake-up call for investors accustomed to the historically unusual powerhouse gains seen in the S&P 500.

In its 2026 outlook report, the shop known for its index funds ran through various scenarios in which AI proves out and in which it disappoints. The bull case for AI is that it eventually boosts the U.S. economy: Vanguard sees GDP growth hitting 3% on average between 2028 and 2035.

But what's good for the economy isn't necessarily good for stocks. Vanguard’s expectations for the U.S. market stem largely from its risk-return assessment of large-cap shares, a useful reminder that the S&P 500's double-digit returns of the past are not guaranteed to continue.

WHY IT MATTERS TO YOU

While investment professionals agree that AI is a megatrend with legs, they are increasingly skeptical that hyperscalers will dominate that category and beat out the more under-the-radar startups waiting in the wings to displace them.

Vanguard's base case suggests U.S. stock returns of around 4% to 5% annually over the next five to 10 years. If AI shoots the lights out, 10-year stock return projections improve to a range of 8% to 10%. And if AI disappoints, return forecasts fall to negative 2% to 2%. (Vanguard puts the probability of the bull case 10% and the bear at 30%.)

Vanguard is not dismissing AI as a transformative technology, but its outlook strongly suggests investors temper their expectations. In Vanguard's bear scenario for AI, the U.S. economy could experience "anemic growth reminiscent of the decade following the 2008 global financial crisis," the report said.

High-quality U.S. fixed income, U.S. value stocks, and non-U.S. developed market stocks offer stronger opportunities than the growth-heavy names that have dominated the benchmark index in recent years, according to the firm. Because AI expectations haven't been priced into U.S. value stocks, in the event that wider adoption of the technology leads to productivity gains, that group stands to outperform growth-oriented tech stocks that have been bid up by the AI trade lately.

Aligning with other investment professionals that have started to grow wary of Big Tech, Vanguard's expectations for smaller long-term U.S. stock returns is underpinned by the chance that the market isn't pricing in the potential for disappointment, especially given the "arms-race dynamics" and the capital required. The risk for Big Tech is being overextended after the AI development phase and unable to deliver the profits that the market expects.

U.S. technology stocks could maintain their momentum in the short run, with earnings growth and faster-than-expected uptake of AI supporting double-digit returns through 2026. However, expectations are already high, and the market continues to underestimate the force of "creative destruction"—when new entrants erode legacy businesses' moats and displace them. That raises the likelihood of disappointment, according to Vanguard.

It's an open question whether the Magnificent Seven—Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Meta Platforms (META), and Tesla (TSLA)—or the thousands of private AI startups end up leading the AI revolution. Most of the hyperscalers were unknown or nonexistent during the dot-com boom, Vanguard notes, and "early leaders in tech revolutions rarely maintain their dominance indefinitely."

Jonathan Raa / NurPhoto / Getty Images

Oracle's fiscal second-quarter sales fell short of estimates

Key Takeaways

• Oracle led tech stocks lower Thursday after the cloud computing provider's quarterly sales missed analysts' estimates.
• New commitments from AI heavyweights Nvidia and Meta failed to offset the revenue miss, and resolve concerns about Oracle's reliance on a few big clients.

Oracle's (ORCL) stock tumbled Thursday, dragging other tech stocks down along with it, a day after the cloud computing giant posted sales that missed analysts' estimates.

Oracle said new agreements with AI heavyweights Meta Platforms (META) and Nvidia (NVDA) helped grow its backlog to a record $523 billion, though that failed to sway investors from selling off Thursday amid persistent worries about circular AI deals and the company's reliance on a few large customers.

Shares of Oracle were down nearly 14% in recent trading. AI hardware makers Advanced Micro Devices (AMD), Micron Technology (MU), and Broadcom (AVGO)—which is set to report earnings after the closing bell today—also lost ground.

Why This Matters to Investors

Oracle shares rallied to a record high following its earnings report in September, but the stock has given up those gains in the months since amid growing worries about an AI bubble. Oracle's stock plunge Thursday despite a record backlog and pressure on other AI-exposed stocks could be taken as a signal of weakening confidence in the AI trade.

Still, most Wall Street analysts say they're standing by Oracle's stock. Though ratings are still in flux, a majority of the 12 analysts with current ratings compiled by Visible Alpha consider the stock a "buy" with just three neutral ratings and one analyst advising selling the stock.

William Blair analysts wrote following the report that while they expect Oracle's stock could be limited in the near term by debt concerns and spending plans, they believe its buildout "will pave the way for significant earnings growth in the years to come."

Bryan Bedder / Getty Images for Bloomberg Philanthropies

Bill Gates warned about stretched AI stock valuations in an interview with CNBC on Wednesday.

Key Takeaways

• Bill Gates on Wednesday warned the AI industry will be "hyper-competitive," and that "a reasonable percentage" of today's pricey tech stocks will lose a lot of their value.
• Big tech's huge data center investments fueled concerns about an AI bubble and weighed on tech stocks in November.

One of America’s legendary tech founders has a warning for AI investors: They can't all be winners.

“Not all of these valuations will end up going up. Some of them will go down," Bill Gates, co-founder of tech giant Microsoft (MSFT), said of AI stocks in an interview with CNBC on Wednesday. "It’s going to be hyper-competitive. A reasonable percentage of those companies won’t be worth that much.” 

Microsoft is among the tech giants whose massive investments in artificial intelligence have fueled the AI bubble debate raging on Wall Street. The so-called hyperscalers—Microsoft, Alphabet (GOOG), Amazon (AMZN), Meta Platforms (META), and Oracle (ORCL)—are expected to spend $400 billion on infrastructure—much of it dedicated to training and running AI models—this year, and more than $500 billion next year.

Why This Is Important

The AI boom has been the driving force behind the stock market rally for much of the past three years. But the rally has faltered in recent months due to lofty valuations and concerns that tech giants are overspending on AI. Some experts are reminding investors to pick and choose.

Some investors worry the sheer size of those figures has encouraged speculation on Wall Street, causing some AI stocks to trade at eye-watering valuations.

Software firm Palantir (PLTR) has a price-to-earnings ratio of more than 400, one of the highest in the S&P 500. Shares of chip designers Broadcom (AVGO) and Advanced Micro Devices (AMD) have soared this year on hopes they can take market share from AI chip leader Nvidia (NVDA); those gains have nudged their PE ratios above 100, more than three times that of the S&P 500 as a whole.

Then there's the cohort of unprofitable startups commanding lofty valuations in private markets. OpenAI, the company behind ChatGPT, isn't expected to turn a profit before the end of the decade. Yet the start up was valued at $500 billion in October, which would make it the 16th largest public company in America.

The AI buildout has turbocharged the sales and profits of some companies, leaving their valuations relatively steady despite big stock gains. AI demand has accelerated growth in the cloud computing businesses of Alphabet, Microsoft, and Amazon, all three of which have PE ratios hovering around 30. Booming demand for Nvidia’s chips made it a $4.5 trillion company, but shares trade at a relatively modest 45 times earnings. 

Bubble jitters have hit tech stocks several times since ChatGPT sparked the AI craze on Wall Street. In November, the Magnificent Seven nearly entered a technical correction. Less established competitors like Oracle (ORCL) and CoreWeave (CRWV) have performed even worse.

As with past pullbacks, investors shook off valuation concerns and bought the dip, lifting tech stocks out of their slump. As of Wednesday, the tech-heavy Nasdaq Composite was just 1% off its record high from late October.

Stock valuations aside, Gate said he's confident in AI's potential to transform society and power advancements in health, education, and agriculture. AI, he said, "is a technology that's deeply profound, that will reshape the world. There’s not the slightest doubt about that."

News of the day for Dec. 11, 2025

Michael M. Santiago / Getty Images

The S&P 500 on Wednesday closed just a few points shy of a record high.

Stock futures are lower this morning, led by tech sector declines, after major indexes surged on Wednesday following the Federal Reserve's decision to cut interest rates; the Fed has trimmed its benchmark rate at each of its last three policy meetings, but the outlook for additional cuts is far from clear; Oracle shares are sinking after the cloud computing giant released its quarterly results, reviving concerns about an AI bubble; Chipmaker Broadcom is set to post its own quarterly results after the closing bell today; and Coca-Cola has named a new CEO. Here's what you need to know today.

Stock Futures Slip As Tech Sector Under Pressure

Stock futures are pointing to a slightly lower open on Thursday, a day after major indexes closed near record highs following the Federal Reserve's decision to cut its key interest rate. This morning, tech stocks are leading the declines as Oracle shares are tumbling after the company released its quarterly results. (see more below) Futures tied to the S&P 500 and the tech-heavy Nasdaq were recently down 0.3% and 0.5%, respectively, while Dow Jones Industrial Average futures hovered near unchanged. The yield on the 10-year Treasury note, which affects borrowing costs on all sorts of loans, was at 4.12% this morning, down from 4.16% at yesterday's close and a three-month high of 4.21% early yesterday. Bitcoin was at $90,300 recently, down from yesterday afternoon's high above $94,000. Gold futures were up 0.5% at $4,245 an ounce, while WTI crude oil futures slipped 1.2% to $57.80 an ounce.

The Fed Has Been Cutting Rates. Will That Continue?

The Federal Reserve has been steadily cutting rates in recent months—but it's far from certain that more cuts are on the way anytime soon. After trimming its benchmark rate on Wednesday, Fed Chair Jerome Powell said that the current fed funds rate is at the high end of the "neutral" range where Fed officials think the rate is neither turbocharging the economy with easy money nor slowing it down with high borrowing costs. The Fed is "well-positioned to determine the extent and timing of additional adjustments based on the incoming data, the evolving outlook and the balance of risks," Powell told reporters. Fed officials are projecting just one additional cut in 2026, according to the Summary of Economic Projections released Wednesday, while financial markets are pricing in the likelihood that the Fed will stand pat at least through March. President Donald Trump has been pushing the Fed to aggressively cut interest rates, and he's set to replace Powell when the Fed Chair's term expires in May.

Oracle Stock Sinking After Earnings Report Revives AI Bubble Concerns

Oracle (ORCL) shares are plummeting this morning after the cloud computing giant's latest earnings report included sales that fell short of estimates. Oracle's new agreements with AI giants Meta Platforms (META) and Nvidia (NVDA), which grew its backlog of orders to $523 billion, did not appear to answer investor concerns about an AI bubble. The stock has more than given back the gains that it saw after last quarter's report, when shares soared to a record high. In the months since, investors and analysts have raised questions about Oracle's reliance on a small number of customers and whether the new debt it will take on to build out AI infrastructure could put its financial health in jeopardy. Oracle shares were down 13% in recent premarket trading.

Broadcom Earnings Due After The Closing Bell

Broadcom (AVGO) will give investors another indication of the health of the AI trade when the chipmaker releases its results after the closing bell today. Broadcom is expected to report record revenue figures thanks to booming AI demand, though analysts have warned that the company faces risks. One potential threat: Alphabet's (GOOGL) Google is looking to design its own future generations of AI chips in house, rather than the current generation that it has designed in partnership with Broadcom. For now, however, Broadcom is riding high; its stock hit a record high Wednesday and has gained nearly 80% in 2025. Shares were down about 1% ahead of the bell this morning.

Coca-Cola Names New CEO to Take Over in March

One of America's most well-known brands is getting a leadership shakeup in the new year. Coca-Cola (KO) said after the bell Wednesday that COO Henrique Braun will step into the role of CEO in March. Current CEO James Quincey, who has led the soda maker for nine years, will become executive chairman. Braun, who joined the company in 1996, has been COO since the start of this year. He previously served in a number of roles leading several of Coca-Cola's international segments. Shares of the beverage maker, which have gained 13% since the start of the year, were little changed in premarket trading.

Sheldon Cooper / SOPA Images / LightRocket / Getty Images

Micron Technology is set to report fiscal first-quarter earnings next Wednesday.

Key Takeaways

• Micron Technology shares hit a fresh record high Wednesday after Wall Street analysts boosted their price targets for the stock ahead of the company's earnings report next week.
• Analysts say that surging demand for memory chips made by Micron and other companies is causing a shortage and a massive increase in prices, which should boost Micron's sales and profits in the coming quarters.
  

One of the hottest AI stocks appears to have more room to run.

Shares of Micron Technology (MU) have surged to all-time highs this week as analysts continue to raise their targets for the memory chip maker ahead of next week's earnings report.

Citi analysts on Wednesday lifted their price target to $300 from $275, now double where their target for the stock was in early September. The analysts said the increasing demand for the advanced memory chips used to run artificial intelligence models should help bring in "large capital infusions" that help Micron and other memory chip makers boost their manufacturing capabilities to meet demand.

Micron shares rose more than 4% Wednesday to a record closing high of just below $264. The stock price has more than tripled since the start of the year.

Why This Matters to Investors

Micron supplies memory components to other manufacturers such as Nvidia (NVDA) and Advanced Micro Devices (AMD), making Micron one of many beneficiaries of the AI trade. Micron is the top performing stock in the Nasdaq 100 this year, and only four stocks in the S&P 500 have posted bigger gains in 2025.

Artificial intelligence companies are looking to buy the chips as fast as they can be made, leading to a shortage of memory chips that Citi analysts say is causing "unprecedented increases" in pricing, which should further boost Micron's sales and profits.

Deutsche Bank analysts on Tuesday hiked their own price target to $280 from $200, calling Micron "well poised to benefit" from changes in the memory-chip market. The analysts also called Micron "particularly attractive among the memory names given its unique ability to prioritize profitability over market share in this environment."

Morgan Stanley analysts raised their own price target for Micron last month to $325 from $220 after upgrading the stock in October, calling the memory chip maker a "top pick" because of how that dramatic increase in pricing for memory products could boost sales and profits in the next year, even if prices start to normalize.

Analysts are largely bullish on Micron stock, but its average price target suggest that some analysts think the chip maker's stock has hit its ceiling, or are waiting until after next week's report to adjust their view. The 11 analysts with current ratings tracked by Visible Alpha are split between nine "buy" and two "hold" ratings, with the average price target among those analysts at around $237.