US markets fell sharply on Wednesday as investors continued to rotate out of large-cap artificial intelligence leaders, extending a pullback that has gathered momentum through December. The S&P 500 dropped 1.16%, the Nasdaq Composite slid 1.81%, and the Dow Jones Industrial Average fell 228 points, or 0.47%. Both the S&P 500 and the Dow are now on track for a fourth consecutive negative session.
Selling pressure intensified into the New York afternoon, with the S&P 500 trading near session lows by mid-afternoon local time, reflecting growing unease about valuations and funding risks tied to the AI buildout.
Oracle sparks renewed tech sell-off
The latest wave of selling was triggered by reports surrounding Oracle’s data centre expansion plans. Shares in Oracle fell around 5% after reports indicated that Blue Owl Capital had opted not to provide equity financing for a proposed $10bn data centre project in Michigan, citing concerns around debt levels and capital intensity. Oracle has disputed the report and said the project remains on track, but the market reaction was swift.
Investor sensitivity around data centre financing has increased in recent weeks, as large technology groups ramp up spending on AI infrastructure while cash flow generation remains uneven. The focus on Oracle followed earlier reports, also denied by the company, suggesting delays to some AI-related projects.
AI leaders retreat, value gains favour
The weakness in Oracle spilled across the broader AI complex. Broadcom dropped about 4%, Nvidia lost roughly 3%, Advanced Micro Devices fell around 5%, and Alphabet declined close to 3%. Tesla slid more than 4%, leading losses among the so-called Magnificent Seven, though the stock remains up close to 20% from its November low. Microsoft was a notable exception, edging modestly higher.
Market strategists say the moves reflect a clearer rotation away from expensive growth stocks towards more defensive, value-oriented sectors, including financials. The shift has been driven by questions over which companies will ultimately monetise heavy AI investment and whether current valuations adequately reflect that risk. Month to date, Oracle and Broadcom are down 12% and 18% respectively, while the Technology Select Sector SPDR ETF has fallen 2.3%.
Economic data and policy uncertainty
Broader sentiment has also been shaped by US labour market data released earlier in the week, which combined November figures with delayed October data following the government shutdown. The report raised fresh questions about underlying economic momentum at a time when monetary policy uncertainty remains elevated.
Strategists expect the rotation away from highly valued technology names to persist into 2026, potentially increasing market volatility as investors place greater emphasis on balance sheet strength and free cash flow.
Australian market outlook
Australian shares are set to open lower, with SPI 200 futures down 14 points, or 0.16%, at 8,547. Locally, ANZ and Elders are holding annual meetings today, while New Zealand releases third-quarter GDP data at 8.45am AEDT.
Offshore, attention turns to central bank meetings from Sweden’s Riksbank, the Bank of England and the European Central Bank.
