US tech stocks slide as Oracle data centre setback reignites AI concerns – Financial Times
US tech stocks fell on Wednesday, as news that Oracle has lost a key backer for a data centre project reignited investor concerns over soaring spending by artificial intelligence companies and the debt that is funding it.
The tech-heavy Nasdaq Composite dropped 1.8 per cent in New York to finish at its lowest level since late November. Oracle fell 5.4 per cent.
The declines for the software company came after the Financial Times reported that Blue Owl Capital, the primary backer for Oracle’s data centre projects in the US, will not fund a $10bn data centre in Michigan.
Oracle shares have fallen almost 46 per cent since they peaked in early September as the company finds itself at the centre of Wall Street’s growing unease over the vast debt being taken on to fund the build-out of AI infrastructure.
Wednesday’s moves follow a sell-off late last week sparked by earnings from Oracle and chipmaker Broadcom that fell short of lofty investor expectations.
Other big tech stocks also fell on Wednesday. Nvidia was down 3.8 per cent, while Alphabet fell 3.1 per cent. Broadcom declined 4.5 per cent.
“Oracle news is certainly the main factor [in tech stocks’ renewed wobble],” said Mike Zigmont, co-head of trading and research at Visdom Investment Group. Blue Owl’s decision to pull out was being seen in the markets as “a sign that they’re not as bullish as [some investors] are” on the AI boom, he added.
In contrast to the gloomy sentiment, memory chip company Micron, an important Nvidia supplier, gave a bullish outlook following Wall Street’s closing bell. The Idaho-based group said it expected to generate about $18.7bn in revenue for the current quarter, far above consensus estimates of $14.5bn, helping push its shares up 3.8 per cent in after-hours trading.
Chief executive Sanjay Mehrotra said the company was benefiting from a constrained supply of the most advanced memory chips, which are required for training and running AI models in data centres. Micron shares were already up more than 160 per cent in the year to date.
The blue-chip S&P 500 index dropped 1.2 per cent on Wednesday. Although the Wall Street benchmark has been dragged down by the renewed tech jitters in recent days, it remains not far below its record closing level from last week.
Asian stocks followed Wall Street lower on Thursday. Japan’s Topix opened down 0.4 per cent, while South Korea’s Kospi fell 1.2 per cent and China’s CSI 300 index retreated 0.3 per cent.
The sell-off in tech prompted investors to seek the relative safety of defensive sectors, including consumer staples being the benchmark index’s second-best performer and only a small decline for healthcare.
Energy was the S&P 500’s best-performing sector, gaining more than 2 per cent, as US President Donald Trump’s plan to order a “total and complete blockade” of sanctioned oil tankers travelling to and from Venezuela helped send the price of Brent crude 1.2 per cent higher.
Arun Sai, a strategist at Pictet Asset Management, said the moves were probably a result of profit-taking by investors who have made money in AI-linked investments this year.
“Investors are increasingly seeing their AI holdings as a funding source for next year’s trades,” Sai added.
Additional reporting by Michael Acton in London
