The AI investment boom hit a major speed bump on Wednesday as tech stocks tumbled following reports that Blue Owl Capital backed out of financing a massive $10 billion data center project in Michigan intended for OpenAI. Oracle shares led the market decline, dropping as much as 6%, while the tech-heavy Nasdaq Composite shed more than 1%.
The Financial Times reported that talks between Oracle and Blue Owl Capital stalled over concerns about Oracle’s aggressive AI spending and mounting debt levels. The private credit firm ultimately decided not to move forward with funding the ambitious data center project, raising fresh questions about the sustainability of massive AI infrastructure investments. However, Oracle quickly disputed the report, with spokesperson Michael Egbert stating that their development partner Related Digital had “selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl.”
The selloff rippled across the AI sector, with major players experiencing significant declines: Broadcom fell 5%, Palantir dropped 4%, while Nvidia, Advanced Micro Devices, and Taiwan Semiconductor each declined 3%. This represents a broader rotation away from expensive tech stocks into other market sectors, according to Adam Turnquist, chief technical strategist at LPL Financial, who noted that “positioning data showing rising demand for smaller-cap and value stocks.”
Oracle has been particularly hard hit in recent months, with shares down 45% from their early September peak. The company recently triggered another tech selloff after reporting lower-than-expected earnings and announcing plans to increase capital expenditures beyond market expectations. The concerns center on the enormous debt loads companies are taking on to build AI infrastructure.
CoreWeave emerged as another cautionary tale in the AI investment space, with its stock down 66% from its post-IPO high reached in June. Like Oracle, CoreWeave has spooked investors with its high debt load and heavy reliance on a limited number of customers, highlighting growing anxieties about the financial health and sustainability of the AI infrastructure buildout.
Key Quotes
The FT story is incorrect. Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl. Final negotiations for their equity deal are moving forward on schedule and according to plan.
Michael Egbert, Oracle spokesperson, disputed the Financial Times report, suggesting the data center project is still moving forward with alternative financing despite Blue Owl’s withdrawal.
Additionally, rotation pressure out of tech has accelerated, with positioning data showing rising demand for smaller-cap and value stocks.
Adam Turnquist, chief technical strategist at LPL Financial, explained the broader market shift away from expensive AI and tech stocks, indicating a fundamental change in investor sentiment toward the sector.
Our Take
This news represents a watershed moment for AI infrastructure investment. The enthusiasm that drove unlimited capital into AI projects is clearly waning as financial realities set in. The 45% decline in Oracle shares and 66% drop in CoreWeave since their peaks aren’t just corrections—they’re market warnings about unsustainable debt levels and questionable business models. What’s particularly telling is that this isn’t about AI technology failing to deliver; it’s about the financial engineering required to build AI infrastructure becoming too risky for sophisticated investors like Blue Owl Capital. This could force a healthy recalibration where AI companies must demonstrate clearer paths to profitability rather than relying on the “build it and they will come” mentality. The sector may emerge stronger from this correction, but the easy money era for AI infrastructure appears to be ending.
Why This Matters
This development signals a potential turning point in the AI investment narrative that has dominated markets for the past two years. The collapse of a $10 billion data center deal raises critical questions about whether the massive capital expenditures required for AI infrastructure are sustainable and whether investors are becoming more cautious about the sector’s debt-fueled growth model.
The broader market rotation away from AI stocks suggests investors are reassessing valuations and risk in the sector. With companies like Oracle and CoreWeave experiencing dramatic declines due to debt concerns, this could mark the beginning of a more discriminating investment approach where profitability and financial stability matter more than pure AI exposure. For businesses planning AI strategies, this may signal tighter financing conditions ahead for large-scale infrastructure projects. The incident also highlights the enormous capital requirements of the AI revolution and questions about who will ultimately bear the financial risks of building the infrastructure needed to support next-generation AI models like those from OpenAI.
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Source: https://www.businessinsider.com/stock-market-news-oracle-stock-price-ai-data-center-blue-owl-2025-12