Another day, another update that's giving investors anxiety about the AI trade.
The US tech sector was under pressure on Wednesday as traders took in a report from The Financial Times that said Blue Owl Capital wouldn't back a $10 billion data center the company was planning to build in Michigan for OpenAI.
Oracle shares led the broader market lower, falling as much as 6% Wednesday. The tech-heavy Nasdaq Composite shed more than 1%.
Here's where US indexes stood shortly around 1:00 p.m. ET on Wednesday:
- S&P 500: 6,743.87, down 0.83%
- Dow Jones Industrial Average: 47,969.74, down 0.3% (-140 points)
- Nasdaq composite: 22,837.25, down 1.17%
Here were the other notable moves in the market:
- Broadcom: -5%
- Palantir: -4%
- Nvidia: -3%
- Advanced Micro Devices: -3%
- Taiwan Semiconductor: -3%
The latest developments extend a broader rotation out of the market's most expensive tech stocks and into other parts of the market.
The enthusiasm for AI has dampened particularly in the past week, Adam Turnquist, the chief technical strategist at LPL Financial, said on Wednesday.
"Additionally, rotation pressure out of tech has accelerated, with positioning data showing rising demand for smaller-cap and value stocks," Turnquist said of the latest market moves.
The FT's report said that talks between Oracle and Blue Owl Capital stalled over the planned data center. The private credit firm will not move forward with funding the project due to concerns about Oracle's hefty AI spending and growing debts, sources told the outlet.
Oracle disputed the contents of the FT report.
"The FT story is incorrect. Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl. Final negotiations for their equity deal are moving forward on schedule and according to plan," Michael Egbert, a spokesperson for Oracle, told Business Insider in an email.
It's been a rough few months for the AI trade, but particularly for Oracle. After impressing investors with an aggressive revenue forecast, the stock has declined steadily in the last two months as the company stokes more concerns about the large amounts of debt coursing through the AI space. Shares are down 45% from their peak in early September.
Oracle recently triggered another sell-off in tech after reporting lower-than-expected earnings and pledging to increase its capital expenditures more than expected in the coming year.
CoreWeave is the other prominent tech name to join Oracle recently as a poster child of investors' growing anxieties about the health of the AI trade. Similar to Oracle, CoreWeave has spooked investors with its high debt load and reliance on a handful of customers. As of Wednesday afternoon, the stock is down 66% from its post-IPO high reached in June.
