AI-related stocks plummet: Oracle and Coreweave debt crisis shocks the market

Source: BlockMedia Original Title: AI-related stocks plummet one after another… Oracle and Coreweave ‘Debt Shock’ Sweeps the Market Original Link: The decline of AI-related stocks in the New York stock market is widening. Concerns over debt financing for large-scale data center projects led by major companies like Oracle and Coreweave are spreading, causing semiconductor stocks such as Broadcom and NVIDIA to fall simultaneously. Investors are beginning to recognize the tangible limitations of AI infrastructure investments.

According to MarketWatch, Broadcom’s stock once dropped over 5% during trading, marking five consecutive days of decline. The total decline exceeds 21%, the most severe correction since the early days of the March 2020 pandemic. Meanwhile, NVIDIA fell 3.48%, AMD dropped 5.16%, and Micron Technology declined 2.59%. The Philadelphia Semiconductor Index (SOX), reflecting the overall semiconductor industry, fell 3.70%, with a cumulative decline of over 9% over five trading days.

The core reason for this decline is the financing uncertainty surrounding “new cloud” companies leading AI infrastructure expansion. Reports that large data center projects by Oracle and Coreweave are encountering difficulties due to debt issues have dampened market investor sentiment.

D.A. Davidson analyst Gil Luria commented, “If Oracle and Coreweave fail to increase debt financing, their chip purchasing power could decline, which may negatively impact the entire AI sector.”

Oracle has been collaborating with BlueOak Capital to advance a $10 billion data center project in Michigan for the OpenAI initiative. However, recent reports from the Financial Times indicate that negotiations between the two sides have reached an impasse. This project is a large-scale 1GW facility considered critical infrastructure to meet AI demand. As a result, Oracle’s stock fell 5.86% during trading. Oracle denied the report, stating, “Actual negotiations are proceeding as planned with real estate developer Related Digital.”

Coreweave is also struggling under negative sentiment. Its stock price dropped over 6%, and short-seller Jim Chanos recently pointed out in a podcast, “Coreweave is just an intermediary leasing NVIDIA GPUs, without creating substantial added value,” highlighting the fragility of its business model. He specifically noted that the rapid depreciation of high-priced AI chips has become a significant burden on profit structures.

Adding to the concerns, The Wall Street Journal reported delays in the construction of Texas data center clusters, further spreading the perception that AI infrastructure expansion is being hindered.

Some voices in the market believe this correction is excessive. UBS analyst Jordan Klein stated, “As year-end trading volume decreases, investors are overreacting.”

Futureum CEO Daniel Newman also emphasized, “There is no substantial basis for the slowdown in AI infrastructure investment. This sell-off is merely a short-term reaction to capital expenditure and debt concerns; the fundamental AI demand remains strong.”