The three major indexes on Wall Street closed lower. As Oracle's plan for a large-scale artificial intelligence (AI) data center became gridlocked, doubts about massive AI capital spending grew, sending tech stocks sharply lower.
On the 17th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average finished at 47,885.97, down 228.29 points, or 0.47%, from the previous session. The Standard & Poor's (S&P) 500 fell 78.83 points, or 1.16%, to 6,721.43, and the tech-heavy Nasdaq dropped 418.14 points, or 1.81%, to 22,693.32.
Oracle is pushing to build a 1-gigawatt data center in Michigan, but the plan hit a snag after key investor Blue Owl Capital, a private credit fund, pulled out.
The data center was set to be built after Oracle struck a $300 billion deal with OpenAI, and Blue Owl had supported it by raising additional billions of dollars in liability. However, as lenders, skeptical about massive AI capital spending, demanded stricter liability terms, Blue Owl appears to have decided to walk away, seeing the investment as less attractive.
Following the news, the Philadelphia Semiconductor Index, composed of AI and chip-related stocks, fell more than 3%. Nvidia, Broadcom, and TSMC lost around 4%, while ASML, AMD, and Lam Research plunged more than 5%.
Among mega-cap tech companies with market capitalization above $1 trillion, Alphabet and Tesla fell more than 3%. Oracle tumbled 5.40%.
By sector, technology slumped 2.19% while energy rose 2.21%. Industrials, communication services, and consumer discretionary fell more than 1%.
Ryan Jacob, founder of Jacobs Investment Management, said, "The Oracle data center buildout is affecting AI stocks broadly," and noted, "There is growing unease in the AI market."