Wall Street faced a broad selloff on Wednesday, with the technology sector bearing the brunt as investors grew wary of heavy capital expenditures tied to artificial intelligence, rising inflationary pressures, and escalating geopolitical tensions between the U.S. and Iran. The Dow Jones Industrial Average plunged nearly 1,000 points, closing down 953.33 points, or 1.87%, at 49,918.78. The S&P 500 fell 1.62% to 7,266.99, while the Nasdaq Composite dropped 1.98% to 25,169.50.
Chip Stocks Lead the Decline
Semiconductor stocks were hit hardest, with the sector losing 3.6%. Heavyweights Nvidia and Broadcom were among the top drags on the S&P 500. The S&P 500 technology sector has now fallen 11% from its June 2 record close, officially entering correction territory—defined as a drop of at least 10% from a recent high. The selling pressure persisted into after-hours trading, with equity index ETFs and futures continuing to slide, setting a weak tone for Thursday's session.
Oracle's AI Spending Raises Concerns
Oracle reported fiscal fourth-quarter revenue of $19.2 billion, up 21%, and cloud revenue climbed 47% to $9.9 billion, with cloud infrastructure revenue surging 93% to $5.8 billion. However, the company's outlook for fiscal 2027 capital spending exceeded Wall Street estimates, and it announced plans to raise nearly $40 billion through debt and equity. Oracle shares dropped 8.9% in after-hours trading, signaling that investors are now questioning how much cash, debt, or shareholder dilution will be needed to translate AI orders into profits.
Super Micro Computer's Capital Raise
Super Micro Computer added to the narrative on Tuesday, announcing a $7.0 billion equity and equity-linked fundraising package, including $5.0 billion in underwritten public offerings and up to $2.0 billion via an at-the-market program. The company plans to use the funds to purchase components for approximately $39 billion in new AI server orders from over 20 clients. The stock plunged 28% in Wednesday's regular session, underscoring that even robust AI demand cannot shield shares from sharp declines when companies fund growth through stock sales or expensive capital.
Inflation Data Adds Pressure
New inflation data from the Labor Department showed the Consumer Price Index rose 0.5% in May, up 4.2% year-over-year. Energy contributed more than 60% of the monthly increase, with gasoline prices jumping 7.0%. While the figures were not unexpected, markets reacted negatively as traders had already begun adjusting to a more hawkish Federal Reserve. The Fed is still expected to hold rates steady in June, but investors now anticipate at least one more quarter-point rate hike before year-end. Higher interest rates typically weigh on growth stocks by reducing the present value of future earnings.
Geopolitical Tensions Escalate
Geopolitical risk intensified after reports that President Donald Trump warned the U.S. would strike Iran again without a peace deal. Later, U.S. Central Command confirmed that U.S. forces hit multiple Iranian targets at 5:15 p.m. EDT. The combination of rising energy inflation and geopolitical instability has further dampened risk appetite.
Market Implications and Outlook
Investors are now weighing a balanced scenario: the selloff could moderate if oil prices stabilize, core inflation remains under control, and AI companies begin converting heavy infrastructure spending into high-margin returns. On the flip side, if Iran tensions sustain energy inflation, the Fed signals another rate hike, and AI firms continue tapping markets for more cash than anticipated, the selloff could deepen. Thursday's open will hinge on whether futures find a floor overnight and whether Oracle's cautious commentary on AI data-center spending remains company-specific or triggers a broader reassessment of tech valuations.
