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'Oracle shock' hits AI-related stocks... Nasdaq plunges [New York Stock Market Briefing]

Korea Economic Daily

Summary

It reported that delays in Oracle's data center completion and the departure of a key investor raised concerns about bottlenecks in AI infrastructure expansion.
Due to such uncertainty, major tech stocks, including the Nasdaq, and AI and semiconductor-related stocks fell sharply across the board.
While some companies, including Oracle, fell sharply, stocks with lower AI concentration relatively held up.

Nasdaq down 1.81%

All three major U.S. stock indices fell together, with technology stocks plunging. Oracle postponed the completion timing of some data centers, raising concerns about bottlenecks in the expansion of artificial intelligence (AI) infrastructure, and worries about Oracle's finances, including a surge in debt, also emerged.

On the 17th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 47,885.97, down 228.29 points (0.47%) from the previous session. The S&P 500 fell 78.83 points (1.16%) to 6,721.43, and the Nasdaq Composite plunged 418.14 points (1.81%) to close at 22,693.32.

Oracle's 1-gigawatt data center being built in Michigan ran into trouble after the exit of a key investor, private credit firm Blue Owl Capital.

Blue Owl had been negotiating investments with lenders and Oracle for this data center. The data center is being built as part of an agreement in which Oracle and OpenAI committed to an investment valued at $300 billion.

Blue Owl had supported the data center not only with its own funds but also by raising tens of billions of dollars in additional debt. However, as doubts grew in the market over massive AI-related capital expenditures, lenders reportedly demanded stricter debt conditions for the data center, causing the deal to fall apart. Blue Owl reportedly decided to withdraw from the data center construction, judging that tighter debt terms would reduce its investment appeal.

The news triggered heavy selling focused on technology stocks. Although Oracle said the data center construction was proceeding without disruption, the Philadelphia Semiconductor Index, composed of AI- and semiconductor-related stocks, plunged more than 3%.

With all 30 components of the Philadelphia Semiconductor Index declining, NVIDIA, Broadcom, and TSMC fell around 4%. ASML, AMD, and Lam Research plunged in the 5% range.

Oracle is not listed on Nasdaq, but because it is tied to the AI theme, Nasdaq-listed related stocks were also hit.

Among the major tech companies, Alphabet and Tesla fell more than 3%. Oracle slid 5.4%, bringing it to about half of its September peak.

Companies with relatively lower AI concentration, such as Apple, Microsoft, Amazon, and Meta, fared better around the flat line.

Ryan Jacobs, founder of Jacobs Investment Management, said, "A large part of what is happening with AI stocks is connected to Oracle's data center construction," adding, "There is some unease in the AI market."

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com