AI Stocks Move Lower
- Kevin W. Frisz
- Dec 17, 2025
- 4 min read
December 17, 2025
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” - Joan Robinson, British economist, 1903-1983
Summary
Another big drop in AI stocks is pulling the whole market lower today. At the moment, the S&P 500 is -0.9%. The tech heavy Nasdaq 100 is -1.4%. Our AI basket is -2.8%.
Large AI stocks are down today because of news on both Oracle and Open AI. Neither story is “game changing” per se. Rather they’re just adding fuel to the fears that AI infrastructure growth will not be a steady upward climb to the stars.
We’ll also talk about the ongoing horse race for the next Fed Chair. Just a couple weeks ago, Kevin Hassett, the President’s economic advisor, was the clear favorite. But two other contenders have re-emerged.
AI Weakness Today
AI stocks are weak today. News from Oracle and Amazon are driving it.
Oracle had been the main source of today’s AI drama for two reasons.
First, it was revealed in their quarterly filing yesterday that their expected lease payments for data centers is simply massive. The expected lease payments are much bigger than even the other cloud providers, such as Microsoft and Google. The reason seems to be that Oracle is somewhat late to the cloud party. So rather than building and buying these data centers over time, they’re trying to lease a massive amount of capacity to catch up quickly.
Now, on top of that, The Financial Times ran an exclusive story this morning that Blue Owl (an investment firm) had pulled its commitment to provide funding for a planned Oracle data center in Michigan. Oracle responded that Blue Owl was never part of the funding group to begin with. Regardless of who is actually telling the truth, the market is taking this a bad sign for AI infrastructure growth.
AI shares were already trading lower on the Oracle news alone. But around mid-morning, a headline hit that Amazon is near to making a $10 billion equity investment in OpenAI. As part of the deal, OpenAI will use some of Amazon’s new AI chips. The emergence of another AI chip competitor is punishing the shares of the other AI chipmakers — namely, Nvidia, Broadcom+Google, and AMD.
As a reminder, Nvidia is 7% of the market, Google is 6%, and Broadcom is 3%. So the drops in these titans are dragging on the overall market.
Fed Chair Race
As a reminder, Jerome Powell’s term as Fed Chairman expires next May. The President will nominate the next Fed chair, and the Senate will ratify him. As recently as last week, the President’s senior economic advisor, Kevin Hassett, was heavily favored to win the title. But someone has convinced the President to not commit so soon.
Two new candidates are rising. The first is Kevin Warsh. The main benefit of Warsh is that he is a former Fed Governor himself. He served on the FOMC from 2006-2011, as the youngest member in history. Importantly, he served on the Fed during the Great Financial Crisis, so he is a battle-hardened veteran. He’s a former Morgan Stanley investment banker and an advisor to hedge fund legend Stan Druckenmiller at his Dusquesne Family office. Trump has spoken recently that he will pick “one of the two Kevin’s”.
But, just to make it more confusing, Trump is now also interviewing Christopher Waller. Waller is probably the favorite candidate of Wall Street. He is a current board governor and (perhaps most importantly) does not have any significant experience advising political candidates. Instead, his experience has been limited to academics and the Federal Reserve itself. Waller spoke at the Yale CEO summit this morning. He said rates could be as much as a “full point” lower, given the weak labor market. (After yesterday’s job data, I tend to agree.)
The betting markets are suddenly very confused. Earlier this month, Hassett had a near 90% chance of winning (according to Kalshi). But Hassett is now only around 50%, with Warsh and Waller each getting 20%ish.
For my two cents, I share the concern that Hassett would be seen as too heavily influenced by politics, which would compromise the independence of the Fed. And if the Fed isnt independent, then it might not as well exist at all. You could just have the politicians set interest rates. What could go wrong with that?
Final Thoughts
A funny headline hit Bloomberg last night. The President is considering “asking” the 5 large defense companies to spend less on dividends and share repurchases. Presumably, he wants them to spend more on R&D, manufacturing, and general investment in making new weapons. Well, to be honest, there’s an argument to be made for that. (Anyone else following the NYT’s multi-part expose on the US military?)
But you cant get a little bit pregnant. Once the government orders private companies on how to allocate their profits, are those companies still owned by shareholders? This administration is already well over the gray line of “state influenced” capitalism, but this would be an official step into something different. Something to think about and watch going forward.
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