Stocks dropped sharply Wednesday as jitters about the booming artificial intelligence sector once again returned to the top of investors’ minds.
The catalyst for the tumble was, once again, a story about the cloud computing giant Oracle.
Before the opening bell rang, The Financial Times published a story headlined: “Oracle’s $10bn Michigan data centre in limbo after Blue Owl funding talks stall.”
Blue Owl is a fund that has been the “primary backer for Oracle’s largest data center projects in the U.S.,” according to the report.
In a statement, Oracle said “the FT story is incorrect” but confirmed that Blue Owl was not part of the funding talks.
“Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl,” a spokesman for Oracle said. “Final negotiations for their equity deal are moving forward on schedule and according to plan.”
Related Digital said in a statement shortly after Oracle’s, “The notion that Blue Owl walked away is unequivocally false.” The company said it expects “to deliver the project on schedule.”
Despite the denials, the lack of a publicly identified funding partner for the project rattled investors and stoked fears that Oracle’s recent stumbles could spread to the rest of the AI ecosystem.
Oracle shares ended the day down 5.4%. The stock is now down 41% in just the last three months but still clinging to a 6.8% overall gain this year.
Oracle’s drop dragged other AI-related stocks lower, as well. Some of the worst performers on the Nasdaq 100 index included chipmakers such as Broadcom and Arm Holdings, which were both down around 5%.
The Nasdaq Composite also slid more than 1.8%. The S&P 500 fell 1.2%.
Despite Wednesday’s drama, major indexes remain well in the green for the year that’s coming to a close. The S&P 500’s year-to-date gain is more than 14%, and the tech-heavy Nasdaq Composite’s is more than 17%.
Nvidia, the largest public company in the world and the poster child for the AI boom, dropped 3.8% on Wednesday morning. Advanced Micro Devices, whose business is similar to Nvidia’s, also sank 5.2%.
The ripple effect didn’t stop there, however.
GE Vernova, a manufacturer of gas turbines and other power systems for data centers, also slid 10% and was the worst S&P 500 stock for the day. Constellation Energy and energy provider Vistra also tumbled more than 7.7%.
Despite Wednesday’s jitters, John Higgins of Capital Economics said he and his colleagues don’t believe “the AI rally is dead yet, and expect it to last through 2026.”
“That view underpins our forecasts for strong gains in those equity markets most exposed to it, particularly the US and some of those in Asia,” he wrote in an email Wednesday.
Yet Higgins cautioned that “we don’t think the good times for tech will last forever.” He said Capital Economics suspects “valuations will eventually become sufficiently stretched that a correction is likely,” but not until 2027.
