Nasdaq Index: Oracle and Nvidia Weigh on US Indices as AI Trade Unwinds

Tech Selloff Deepens as Oracle Sinks, Treasury Yields Weigh on Growth Stocks

U.S. stocks fell for a third straight session early Thursday, led by a steep drop in technology shares as traders pulled back on stretched valuations and recalibrated rate expectations.

Shortly after the opening bell, the S&P 500 was down 0.8%, the Nasdaq Composite dropped 1%, and the Dow Jones Industrial Average shed 170 points, or 0.3%.

Once-leading AI stocks like Oracle and Nvidia extended losses, while rising Treasury yields pressured broader risk sentiment.

Is the AI Rally Losing Steam as Oracle Faces Sharp Downgrade?

Oracle sank another 4% after a fresh sell rating from Rothschild Redburn, which predicted a potential 40% downside in the stock, arguing that the market has significantly overestimated the impact of Oracle’s AI partnerships on its core cloud business. The stock is now down more than 10% from its recent high, undercutting its recent leadership during the AI-driven rally.

Nvidia also fell about 1%, marking its third consecutive decline, as traders grow wary of lofty valuations and the tangled relationships between AI software vendors and their hardware partners.

How Are Treasury Yields and Economic Data Impacting Sentiment?

The 10-year Treasury yield climbed near 4.19%, spurred by stronger-than-expected jobs data that added to rate concerns. Weekly initial jobless claims came in at 218,000, below the 235,000 estimate, reinforcing the strength of the labor market.

Additionally, Q2 GDP was revised up to 3.8%, raising the possibility that the Federal Reserve could delay rate cuts longer than markets had priced in. These data points challenged the bullish narrative that has been supported by the prospect of easing monetary policy.

Which Sectors and Stocks Held Up in a Risk-Off Session?

Despite the broader tech pullback, energy and consumer staples showed modest gains, with the Energy sector rising 0.27% and Consumer Staples up 0.11%.

Intel surged 4.1% to lead the S&P 500 gainers, while Biogen and Vertex Pharmaceuticals each climbed nearly 2%.

On the downside, MicroStrategy and GE Healthcare fell more than 4%, and Tesla lost 3.4%. The Technology sector dropped 0.93%, the worst-performing group on the day, followed closely by Communication Services and Consumer Discretionary.

What’s Next for Markets as Traders Eye Inflation and Shutdown Risks?

All eyes now turn to Friday’s release of the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge. A hotter-than-expected print could reinforce higher-for-longer rate concerns. Meanwhile, traders are also monitoring developments in Washington, where a potential government shutdown looms. The Office of Management and Budget has warned agencies to prepare for staff reductions, introducing another layer of policy uncertainty into the market.

Traders should brace for continued volatility, especially in rate-sensitive sectors, with inflation data and fiscal risks likely to dictate near-term direction.

More Information in our Economic Calendar.