AI Spending Fears and Rate Cut Outlooks: How They Are Reshaping Risk Appetite in Tech and Crypto

The intersection of artificial intelligence (AI) and macroeconomic policy has become a defining force in global capital markets. As investors grapple with the dual pressures of surging AI infrastructure costs and shifting Federal Reserve (Fed) policy, the reallocation of capital between AI-dependent equities and cryptocurrencies like Bitcoin and Ether is intensifying. This analysis examines how Oracle's recent earnings, the Fed's rate-cut trajectory, and evolving investor sentiment are reshaping risk appetites, and whether Bitcoin and Ether offer tactical upside or downside risks in this evolving landscape.

Oracle's Earnings: A Microcosm of AI's High-Stakes Gamble

Oracle's Q3 2025 earnings report underscored the growing tension between AI-driven growth and financial discipline. While the company's cloud infrastructure revenue surged 68% to $4.1 billion, reflecting robust demand for AI services, its overall revenue fell short of expectations at $16.06 billion, missing analyst projections by $155 million. The firm's capital expenditures for AI infrastructure now exceed previous estimates by $15 billion, signaling an aggressive pivot to meet demand but raising concerns about the sustainability of returns on such massive investments.

This "AI bubble" anxiety is not unfounded. Oracle's stock plummeted over 13% post-earnings, marking one of the sharpest declines for a large-cap tech stock in the quarter. The market's reaction highlights a broader skepticism: investors are increasingly demanding tangible profitability from AI-driven companies, not just growth in revenue or remaining performance obligations (RPO), which Oracle reported at $523 billion according to market analysis. For now, the company's partnerships with chipmakers like NVIDIA and AMD, and its chip-neutral approach, position it to benefit from the AI platform shift. However, the short-term volatility suggests that capital is already hedging against overvaluation risks in the sector.

Fed Policy: A Double-Edged Sword for Tech and Crypto

The Fed's 2025 rate-cut cycle has introduced a new layer of complexity to capital allocation. While the central bank has signaled a pause in further cuts, the broader easing environment has amplified scrutiny of AI-driven equities. For example, Oracle's 13% post-earnings drop coincided with broader declines in tech stocks like Nvidia and Alphabet, reflecting investor caution about whether AI spending will translate into near-term profitability.

Meanwhile, the bond market has hinted at lingering macroeconomic risks. The 10-year Treasury yield hitting a three-month high in late 2025 suggests concerns about inflation and global borrowing costs, which could dampen the appeal of both tech stocks and crypto assets. Traders are also closely watching the Fed's balance sheet strategy. A potential expansion of the Fed's $6.5 trillion balance sheet could provide liquidity tailwinds for risk-on assets, but this remains speculative.

Looking ahead, BlackRock and J.P. Morgan project a gradual easing path in 2026, with the Fed's target rate expected to reach 3.4% by year-end according to economic forecasts. In such a non-recessionary environment, high-yield bonds and the S&P 500 could outperform, while gold may gain traction as a diversifier. However, the impact on AI equities and crypto will hinge on whether AI-driven growth materializes quickly enough to justify current valuations.

Bitcoin and Ether: Volatility Amid Capital Flight to AI

Bitcoin and Ether have experienced extreme volatility in late 2025, driven by shifting investor sentiment and macroeconomic uncertainty. Bitcoin's 30% drop from its October high to below $85,000 highlights the sector's fragility, while Ethereum's resilience-up 7% in 24 hours to $3,320-suggests divergent dynamics within crypto according to market data.

The redirection of capital from crypto to AI has exacerbated Bitcoin's weakness. Nearly half of global venture capital in Q3 2025 flowed into AI, with 46% of VC dollars funding AI-related ventures. This shift has left crypto with reduced inflows, exposing it to deeper corrections. AI-driven trading algorithms have further amplified Bitcoin's price swings, triggering cascading liquidations during bearish signals.

Macroeconomic factors, such as the strength of the U.S. dollar and tighter monetary policy, have also hurt crypto. As central banks pivot from accommodative to restrictive policies, high-yield assets like bonds and gold have become more attractive, reducing the appeal of non-yielding speculative assets like Bitcoin. However, the anticipation of Fed rate cuts in early 2026 could inject liquidity into markets, potentially supporting a crypto rebound.

Portfolio Reallocation: Balancing AI Equities and Crypto

The current environment demands a nuanced approach to portfolio reallocation. For AI-dependent equities, the key risk lies in overvaluation. Oracle's $15 billion AI capex increase, while indicative of long-term demand, raises questions about short-term returns. Investors must weigh the sector's growth potential against the likelihood of profit-taking or regulatory headwinds.

In contrast, crypto's tactical upside depends on macroeconomic catalysts. According to market analysis, a dovish Fed could push Bitcoin toward $100,000, while a hawkish stance might drive prices below $85,000. However, structural challenges-such as regulatory uncertainty and competition from AI-driven assets-remain. For now, crypto appears best suited as a speculative, high-volatility bet rather than a core holding.

Conclusion: Navigating the AI-Crypto Dilemma

The interplay of AI spending fears and Fed policy is reshaping risk appetites in profound ways. Oracle's earnings highlight the sector's growth-at-all-costs mentality, while the Fed's rate-cut outlook underscores the fragility of current valuations. For investors, the path forward lies in balancing exposure to AI equities-despite their short-term risks-with a cautious, macro-driven approach to crypto. As the Fed's 2026 easing cycle unfolds, the winners and losers in this high-stakes game will depend on how quickly AI delivers on its promises and whether crypto can reclaim its role as a liquidity-driven asset.