US tech stocks tumble after data centre setback sparks investor concerns
US tech stocks fell on Wednesday after news that software company Oracle had lost a key backer for its data centre project, reigniting investors’ concerns about AI companies’ spending.
The tech-heavy Nasdaq dropped 1.8 per cent to $22,693.32 (£ 17,975.06), finishing at its lowest level since late November, while Oracle fell 5.4 per cent to $177.67 (£0.7492).
The blue chip S&P 500 index also dropped 1.2 per cent to $6,720.95.
The decline follows reports from the Financial Times that Blue Owl Capital, the primary backer for Oracle’s data centre projects, would no longer fund a $10bn centre in Michigan.
Oracle shares have nearly halved since their peak in September, as the company found itself at the centre of investor unease over the large amounts of debt AI companies are taking on to build data centre infrastructure.
Wednesday’s move follows just one week after Oracle and chipmaker Broadcom suffered a significant share sell-off after earnings failed to meet investor expectations.
Other tech stocks suffer
Other big tech stocks also fell in price on Wednesday, with analysts pinning the decline on the Oracle news.
Chipmaker Nvidia recorded a 3.81 per cent decline to $170.94, while Alphabet saw its share price fall 3.21 per cent to $296.72.
Deutsche Bank analysts said: “The selloff had multiple drivers, but doubts about AI valuations were top of mind, with Oracle falling to a six-month low.
“The first loss of momentum came after that FT report, which heightened concerns around a potential AI bubble…so tech stocks led yesterday’s declines.”
Asian stocks, which are predominantly tech-heavy, followed the Wall Street fall in Thursday trading, with South Korea’s Kospi falling 1.53 per cent to 3,994.51 KRW, while Japan’s Nikkei 225 fell 1.03 per cent to 49,001.50 yen.
Running to other sectors
The tech selloff led investors to seek the relative safety of other sectors, including consumer staples, which were the index’s second-best performer.
Costco shares inched up 0.26 per cent $862.6,5, while Walmart shares rose 0.21 per cent to $115.66
Meanwhile, energy was the S&P 500’s best performer, gaining more than two per cent, after US President Donald Trump plans to order a blockade of sanctioned oil tankers travelling to and from Venezuela.
Earlier this month, the US escalated a military and economic campaign against the government of Nicolás Maduro in Venezuela over claims of “stolen” oil and land.