A sharp 14% drop in Oracle's share price on Thursday triggered a broader selloff across AI-focused technology stocks, as investors reassessed the sustainability of massive capital expenditure in the sector. The move underscored growing concerns over valuation and spending fatigue in the AI boom.
- Oracle shares fell 14% in early Thursday trading
- Nvidia stock declined 7% amid broader AI sector sell-off
- Advanced Micro Devices dropped 5.5% on investor concerns
- AI-focused ETFs recorded $2.3 billion in outflows
- Nasdaq Composite lost 1.8% in early session
- Oracle’s forward P/E ratio exceeds 50x, raising valuation concerns
Shares of Oracle Corporation fell 14% in early trading Thursday, marking one of the steepest single-day declines for a major tech stock in recent months. The drop sent ripples through global markets, with AI-related equities across the Nasdaq and S&P 500 experiencing significant downward pressure. The sell-off followed a series of investor concerns about the long-term viability of aggressive spending on artificial intelligence infrastructure, particularly by large technology firms. The downturn in Oracle, a key player in enterprise software and cloud services, highlighted deeper unease about the financial model underpinning the current AI investment cycle. Despite strong revenue growth in recent quarters, Oracle’s guidance for capital expenditures in the coming fiscal year signaled a potential slowdown, raising red flags about future profitability. Analysts noted that the stock’s price-to-earnings ratio now exceeds 50x, far above the sector average, suggesting potential overvaluation amid rising interest rates and margin pressures. In response, other AI-focused names also declined sharply: Nvidia shares dropped 7%, Advanced Micro Devices fell 5.5%, and Microsoft dipped 3.2% as investors reassessed the risk-reward profile of tech stocks tied to AI expansion. The broader Nasdaq Composite lost 1.8% in early trading, reflecting broader market anxiety. The selloff was particularly pronounced in growth-oriented ETFs with high AI exposure, where outflows reached $2.3 billion in a single day, according to internal data. Market participants are now scrutinizing whether recent gains in AI-driven stocks are based on sustainable fundamentals or speculative momentum. With rising bond yields and slowing economic growth in key regions, the risk of a correction in high-growth tech segments has increased. The shift in sentiment may signal a broader rotation toward more profitable, cash-generative companies with clear paths to earnings stability.