Oracle & Broadcom Warnings Hit AI Trade, But Investor Optimism Endures

The booming market for Artificial Intelligence (AI)-related stocks faced a significant pullback following troubling financial updates from tech giants Oracle and Broadcom. These events have reignited concerns among some investors about potentially frothy valuations and the risk of an "AI bubble," though overall investor optimism about the long-term prospects of the AI trade remains high.

The company's shares slumped as much as 17% following two pieces of negative news that Oracle warned that capital expenditures for fiscal 2026 are now expected to be $15 billion higher than previously estimated, primarily driven by ambitious AI spending plans.

Fresh pressure emerged on Friday following a report that Oracle pushed back the completion dates for some of the data centers being developed for OpenAI from 2027 to 2028.

Shares fell over 11% on Friday after the chipmaker warned that growing sales of lower-margin custom AI processors were squeezing profitability. This sparked concerns that the custom AI chip business might be less lucrative than anticipated.

The warnings weighed on the broader tech sector, causing the tech-heavy Nasdaq to sink 1.4% and the S&P 500 Index to fall 0.9% on Friday afternoon. The updates reignited comparisons to the 1990s dot-com era, with bearish figures like Michael Burry previously sounding the alarm on high AI-related valuations.

Despite the short-term hit, the article notes that investors remain wary of calling a top to the AI trade, with many convinced that the reasons for long-term optimism remain intact. Short-selling activity has so far been limited primarily to smaller AI firms, leaving the biggest names largely untouched by strong bearish bets.

Chuck Carlson, CEO at Horizon Investment Services, reflected the sentiment, stating, "I still think the AI trade is intact... I don't think this is the beginning of a sustained significant decline."