A Friday report about delays in Oracle's data center projects triggered sharp volatility in AI infrastructure-related stocks and bonds, with the Philadelphia Semiconductor Index plunging as much as 5% intraday—its steepest drop in two months. The news, combined with Broadcom's disappointing earnings, intensified market concerns about the sustainability of AI infrastructure spending.
Oracle shares tumbled over 6% intraday before paring losses to close down 4.5%. The stock has now declined 14.8% over two sessions post-earnings.
The selloff spread across tech stocks. Nvidia, the world's most valuable AI chipmaker, fell 3%, while AI computing provider CoreWeave dropped 11%. Even energy stocks like Constellation Energy (-7%), Vistra, GE Vernova and Cummins were dragged lower.
Oracle's corporate bonds faced even heavier selling pressure. The yield on its 5.2% notes maturing in 2035 surged to 5.9%, exceeding the 5.69% average yield for top-tier junk bonds. This turmoil highlights how Oracle has become a credit market barometer for AI risk, with its weaker credit rating and growing debt load making it particularly sensitive to sentiment shifts.
**Data Center Delay Sparks Chain Reaction**
Reports emerged during Friday's premarket session that Oracle had pushed back completion dates for some OpenAI-dedicated data centers from 2027 to 2028. This triggered broad declines across AI infrastructure stocks.
The Philadelphia Semiconductor Index's 30 components fell up to 5%, with Broadcom plunging 12% at one point and Astera Labs and Coherent Corp. dropping over 10%.
An Oracle spokesperson stated the company remains confident in meeting obligations and expansion plans, asserting that "no delivery addresses required for contractual commitments are delayed" and that schedules were coordinated with OpenAI.
Broadcom's Thursday earnings call had already disappointed investors, with CEO Hock Tan failing to meet lofty AI backlog expectations and providing no full-year AI revenue guidance—setting the stage for Friday's selloff. The dual disappointments from these AI bellwethers amplified doubts about infrastructure spending sustainability.
**Investment-Grade Bonds Get Junk Treatment**
Oracle's investment-grade bonds traded like junk debt on Friday. Trace data showed spreads on its 5.2% 2035 notes widened 17 basis points to 171bps—far above their 105bps issuance spread over Treasuries. At 5.9%, their yield now exceeds the 5.69% average for shorter-duration BB-rated junk bonds.
Investors in Oracle's $18 billion September bond issuance—timed with increased AI project spending—now face approximately $1.35 billion in paper losses.
Credit default swaps (CDS) reflected extreme anxiety, with 5-year Oracle CDS spiking 14.4bps to 151.3bps—hitting levels last seen during the 2009 financial crisis for the second straight session.
**AI Investment Risks Come Into Focus**
Oracle is emerging as a key credit market indicator for AI risk. As a core participant in the $500 billion "Stargate" AI infrastructure project, Oracle has aggressively tapped debt markets this year to fund AI initiatives.
Compared to cloud peers, Oracle's weaker credit profile and ballooning debt—including some bonds maturing in 2065—make it particularly vulnerable to AI uncertainty.
"Nobody knows what these data centers will look like in the future," said Mike Contopoulos of Richard Bernstein Advisors, warning that more efficient chips could leave millions of square feet of infrastructure obsolete. "Funding this technological investment is exactly what credit investors should worry about."
Banks involved in Oracle's construction loans have reportedly bought CDS to hedge exposure, while investors and hedge funds are increasing protection. Oracle co-CEO Clay Magouyrk reiterated the company's commitment to maintaining investment-grade ratings, suggesting borrowing may be lower than analysts expect.
Despite this week's declines, Oracle shares remain up over 10% year-to-date, while the Philadelphia Semiconductor Index has gained 40%—outpacing the S&P 500's 10% rise. However, Friday's selloff shows growing market skepticism about AI infrastructure returns.