Just as the market was still reveling in the grand narrative of AI, Wall Street experienced a brutal 'bloody day' on Friday Eastern Time.
The 'ghost story' of AI is becoming a reality.
Just as the market was still reveling in the grand narrative of AI, Wall Street experienced a brutal 'bloody day' on Friday Eastern Time: cloud giant Oracle and chip leader Broadcom both plummeted. More astonishingly, Fermi, a popular AI infrastructure company, saw its stock price halve during the session, plunging 46%.
This is not just an individual company's setback. Panic spread like wildfire, directly causing the semiconductor index to plummet, nearly wiping out all gains for December. The Nasdaq fell nearly 400 points in a single day. Overnight, investors shifted from boundless optimism about AI to deep anxiety over valuation bubbles.
Meanwhile, a frenzy of AI-driven data center construction is sweeping across Texas, USA, on such a scale that the power grid is overwhelmed — applications for power connections before 2030 exceed 220GW, more than double the peak load, with over 70% being data centers.
“This absolutely looks, smells, and feels like a bubble,” an energy expert said bluntly. “The numbers are laughable… We simply don’t have the capacity to build so many facilities; I’m not even sure if China could do it this fast.”
This precisely reveals the market’s deepest fear: how long can the massive expenditure supporting AI computing power continue at such a rapid pace?
Oracle hit by reports of delays in data center projects, adding to concerns, AI stocks tumble
During the early trading session of the US stock market on Friday, December 12th, Eastern Time, media reported that Oracle had postponed the completion time of some data centers developed for OpenAI from 2027 to 2028. During the midday trading session, Oracle denied the report, with a spokesperson stating via email:
“The site selection and delivery schedules were closely coordinated and mutually agreed upon after signing the agreement with OpenAI. There have been no delays at any of the (data center) locations required to fulfill contractual obligations, and all milestones are expected to be met as planned.”
On Friday, Oracle's intraday decline expanded to over 6%, further exacerbating the slump of more than 11% following the previous day's earnings announcement. Even after Oracle denied media reports, its midday decline remained above 4%, closing down nearly 4.5%. The cumulative decline over the two days since the earnings report was 14.8%. As of Friday’s close, the stock had fallen more than 40% from its peak on September 10, wiping out gains from the past six months.
This news triggered a broad sell-off in AI-related companies. Broadcom maintained a drop of over 10%, closing down 11.4%, while Astera Labs and Coherent Corp. both fell more than 10%. The Philadelphia Semiconductor Index closed down over 5%, marking its largest decline in nearly two months. NVIDIA dropped over 3%, and CoreWeave, an AI computing provider backed by NVIDIA, closed down approximately 10%.
The sell-off even spread to the energy sector, with electricity-related stocks such as Constellation Energy, Vistra, GE Vernova, and Cummins all declining. Nuclear power giant Constellation Energy closed down 7%.
The latest news has heightened investors' concerns about whether infrastructure spending supporting AI computing power can sustain its rapid growth momentum, which has been a key driver of the stock price increases for related companies this year. Despite recent pullbacks, the Philadelphia Semiconductor Index has still surged over 40% year-to-date, outperforming the Nasdaq 100 Index and the S&P 500 Index, which have risen approximately 20% and 16%, respectively.
What exactly happened? Media reports on Friday, citing insiders, revealed that Oracle has postponed the completion date for some data centers being developed for OpenAI from 2027 to 2028. Insiders attributed the delay primarily to labor and material shortages.
Oracle signed a $300 billion contract with OpenAI this summer to provide the computing power needed for training and running AI models. Insiders stated that despite the delays in data center construction, the timelines for these U.S.-based projects remain ambitious and, upon completion, they will rank among the largest data centers globally.
Oracle's co-CEO Clay Magouyrk said on Thursday during the earnings call that the company "has ambitious but achievable capacity delivery targets globally." He noted that Oracle's first data center for OpenAI, located in Abilene, Texas, is proceeding smoothly and has already delivered over 96,000 NVIDIA chips.
Both Oracle and OpenAI declined to comment on Friday’s data center news.
Market panic did not arise without cause; Oracle's deteriorating financial model was the fundamental “powder keg.” This earnings report, released after Wednesday’s market close, instantly triggered turmoil when trading resumed on Thursday: Oracle’s stock closed down nearly 11% on the day, recording its largest single-day drop in nearly 11 months.
The earnings data revealed a harsh reality: growth in its core cloud computing revenue at 34% already fell short of expectations, but capital expenditure surged to $12 billion, far exceeding the anticipated $8.25 billion, to support AI expansion. The company also significantly raised its full-year capital expenditure guidance by 43% to $50 billion. These factors led to a deterioration in free cash flow to negative $10 billion, with total debt climbing to $106 billion.
The market suddenly realized that Oracle’s AI narrative had quietly shifted: from a “high-growth story” to a challenging model of “high investment, high debt, and slow returns.”
Just months earlier, the situation was entirely different. Oracle’s stock soared due to signing large AI contracts, and its founder even briefly topped the list of the world’s richest individuals. This reversal in earnings and stock performance marks the end of a frenzied phase.
Broadcom Posts Strong Earnings but Plummets After Earnings Call
The panic did not stop at cloud service providers.
Despite robust earnings, Broadcom’s stock hit a fresh intraday low on Friday, falling nearly 12%, marking its largest decline in 10 months. The company, which competes with NVIDIA in the AI chip space, reported fourth-quarter revenue of $18 billion and adjusted earnings per share of $1.95 on Thursday after the market close, both surpassing analyst expectations with year-over-year increases of nearly 30% and 40%, respectively.
Broadcom expects first-quarter revenue for fiscal year 2026 to be approximately $19.1 billion, exceeding the average analyst estimate of $18.3 billion. CEO Hock Tan also noted that AI semiconductor revenue will further accelerate this quarter, doubling year-over-year to $8.2 billion after a 74% increase in the fourth quarter. Broadcom also raised its quarterly dividend by 10% to $0.65 per share.
However, remarks made by Hock Tan during Thursday's earnings call unsettled investors. He revealed that Broadcom has a backlog of $73 billion in AI product orders over the next six quarters, but this backlog figure disappointed some investors.
Some media outlets noted that investors were disappointed by Broadcom's failure to provide full-year AI revenue guidance for 2026 and were unimpressed by the $73 billion backlog. Overall, Broadcom fell short of investors’ high expectations.
During the earnings call, Tan also warned that Broadcom's overall profit margins are narrowing due to AI product sales. He stated that AI revenue is “a moving target,” adding, “It’s difficult to pinpoint the situation for 2026 precisely, so I’d rather not give any guidance.”
Regarding the collaboration with OpenAI, Chen Fu-yang clearly stated that the agreement with OpenAI may not bring significant returns to Broadcom by 2026. He said, "We do not expect much (return) in 2026."
According to an announcement of the agreement in October this year, Broadcom will provide OpenAI with up to 10 gigawatts (GW) of data center infrastructure between 2026 and 2029. Chen Fu-yang noted that the majority of the returns from this deal will be realized in 2027, 2028, and 2029.
JPMorgan analyst Josh Meyers commented on Broadcom in a report, saying, "It is surprising to see a conference call that started with such strong numbers and such a compelling narrative end in disappointment."
Popular data center concept stock Fermi nearly experienced a 'single-day halving' in value.
While industry giants suffered a 'major setback,' those AI concept stocks with the most appealing narratives directly entered a 'free fall.'
On Friday, Fermi, a social media-famous AI energy infrastructure company co-founded by Rick Perry, former U.S. Secretary of Energy under the Trump administration, saw its stock plummet by as much as 46% during the trading session, narrowly avoiding a 'single-day halving.'
The immediate trigger for the sharp decline was the company’s disclosure that its major client would be terminating their lease: its first tenant unexpectedly withdrew a construction funding commitment of approximately $150 million, which was originally intended to support the development of its large AI campus in West Texas.
Affected by this news, Fermi's stock price plunged dramatically during the trading session. Although the closing decline narrowed somewhat, it has cumulatively retraced 70% from its post-IPO high in October.
In response to this development, Fermi’s management team made efforts to stabilize the situation in their announcement. The company emphasized that while the tenant refused to provide construction funding, negotiations regarding lease terms were still ongoing and had not completely broken down.
Notably, on the first day of its IPO in October, CEO Tony Neugebauer proudly told the Financial Times that the company had secured one of the 'most valuable and respected technology companies on the planet' as a client.
This article is reprinted from Wall Street News, edited by Chen Wenfang of Zhitong Finance.
