The once-red-hot AI trade is showing signs of strain as investors grow increasingly uneasy about the heavy debt loads companies such as Oracle and CoreWeave are taking on to fund massive data-center expansions.
Concerns over how these buildouts are being financed have rattled AI-related stocks in recent weeks, with selling pressure intensifying on Wednesday amid renewed scrutiny of Oracle’s funding plans.
Broadcom shares slid 4.5% on the day, extending their five-session decline to more than 21% — the stock’s steepest five-day drop since late March 2020, according to Dow Jones Market Data.
Other major chipmakers also moved lower, including Nvidia, Advanced Micro Devices and Micron Technology, which reported fiscal first-quarter earnings after the close. The PHLX Semiconductor Index fell for a fifth straight session, down more than 10% over that span.
“The growing concern that neocloud providers like Oracle and CoreWeave may struggle to finance their data-center buildouts is weighing on the entire AI sector,” D.A. Davidson analyst Gil Luria said in emailed comments. If these firms can’t continue raising debt, he added, their ability to keep spending aggressively on chips comes into question.
Oracle shares dropped more than 5% after a report suggested talks with alternative-asset manager Blue Owl Capital over a $10 billion data-center project had stalled. The proposed 1-gigawatt facility in Michigan was expected to support OpenAI, according to the Financial Times. Oracle has disputed the report, saying it is working with developer Related Digital and that negotiations are progressing as planned.
Mizuho analyst Jordan Klein said concerns around Oracle’s funding are pressuring AI stocks more broadly, noting that thin year-end trading volumes are amplifying market moves.
CoreWeave’s shares also sank more than 7% following criticism from prominent short seller Jim Chanos and reports of data-center delays. Chanos, speaking on the Monetary Matters podcast, described neoclouds like CoreWeave as operating in a “commodity business,” arguing that hosting Nvidia chips doesn’t capture the long-term value created by AI workloads. He also warned that rapid depreciation of AI hardware poses risks to CoreWeave’s debt-heavy model.
Adding to the pressure, The Wall Street Journal reported that CoreWeave is facing delays at a Texas data-center cluster intended for OpenAI, pushing completion back by several months.
Still, not all analysts are bearish. Futurum CEO Daniel Newman said he sees “little to no evidence of a slowdown in the AI buildout.” While debt financing remains the market’s biggest overhang, he believes investor fears are overstated relative to the scale of the AI revenue opportunity.
“This pullback is more of a speed bump as investors digest capex, leverage and execution risk,” Newman said. “The fundamentals remain intact, and demand for AI continues to be insatiable.”
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