US stocks pulled back sharply at midday on Wednesday as investors dumped high-flying technology names and reassessed the AI trade’s underlying economics.
The S&P 500 fell roughly 0.8%, the Nasdaq slumped about 1.3%, and the Dow dipped 0.3%.
The selloff centered on two heavyweights, Oracle and Broadcom, both grappling with investor concerns about profitability and execution.
The pullback reflects a classic midyear profit-taking moment colliding with fresh doubts about the financing and margin structure underpinning AI infrastructure buildout.
For weeks, investors have plowed cash into any company touching artificial intelligence without worrying too much about the nitty-gritty of how these projects actually pencil out.
Wednesday’s action suggests that patience has worn thin.
US stocks decline midday: Oracle and Broadcom lead losses
Oracle shares cratered nearly 5% to around $179.71 after the Financial Times reported that Blue Owl Capital, the company’s largest data-center development partner, had withdrawn support for a $10 billion AI infrastructure project in Michigan.
The deal had been touted as critical to Oracle’s OpenAI ambitions.
That news landed like a thud on a stock that has already tumbled 36% from its September peak and lost roughly 20% in the past week alone.
The company’s earnings report disclosed $12 billion in quarterly capital expenditures, a staggering capital burn that has spooked both fixed-income investors and equity holders.
Credit default swap spreads on Oracle bonds have hit their highest levels since 2009, a blaring red flag that Wall Street is re-evaluating the company’s debt load.
Broadcom fell roughly 5% after its latest earnings revealed a troubling underbelly: yes, AI-driven demand is booming, and revenue guidance for next quarter came in strong at around $19.1 billion.
However, the company warned that gross margins could decline by about 100 basis points sequentially, primarily driven by a richer mix of AI products that carry lower profitability than the legacy business.
That margin warning triggered exactly the kind of sell-now-ask-questions-later reaction that plagues high-growth names when the growth story gets complicated by profitability questions.
Nvidia, which reported a nearly 3% decline on its own earlier this week, continued to feel selling pressure, closing down another 2-3% at midday as traders de-risked AI exposure across the board.
Investors trim AI bets amid margin concerns
The theme underneath all this noise is clear: investors are no longer content to chase AI revenue without scrutinizing the returns.
Oracle’s debt-funded data-center expansion suddenly looks riskier when your largest partner walks away.
Broadcom’s margin squeeze raises questions about whether custom AI silicon can remain as lucrative as early believers assumed.
Energy and defensive sectors caught a bid as money rotated away from high-beta names. Utilities and staples were holding ground while semiconductors and cloud-computing stocks bled red.
The investors will keep a close eye on Thursday’s consumer inflation print and Friday’s Fed-related commentary to see whether macro tailwinds ease the tech malaise.
For now, the market is taking a breather from its AI euphoria, and the question for investors is whether this is healthy consolidation or the start of a deeper repricing.
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