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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 1.3 per cent by early afternoon in New York, with Oracle falling 5 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 now lost nearly half their value 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. Nvidia was down 3.4 per cent, while Alphabet dipped 2.6 per cent. Broadcom was down 5.4 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.
The blue-chip S&P 500 index was down 0.8 per cent. 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 last week.
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.
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