Oracle's stumble hits AI trade, but many investors remain bullish

The red-hot trade backing artificial intelligence related stocks has taken a bruising from a disappointing report from Oracle, reigniting concerns about frothy valuations and an AI bubble.

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Still, investors say reasons for optimism about AI remain intact, and many are wary about calling a top.

Investors have piled into AI-related companies this year as the technology has taken off, with promises to make Corporate America more efficient. Still, some investors feel AI-related shares are overvalued. High-profile names such as Michael Burry have been bearish, comparing the recent AI boom to the 1990s dotcom era. Still, short selling has been limited to smaller companies, with few pressing bearish bets against the biggest AI names. The latest concerns centered on Oracle. Its shares slumped as much as 16.58 on Thursday, a day after the company, which has taken on debt to finance its ambitious AI spending, warned capital expenditures for fiscal 2026 are now expected to be $15 billion higher than it estimated in September. After the bell, adding to negative sentiment, Broadcom cautioned that margins would fall due to a higher mix of AI revenue, sending shares lower in after-hours trading. Oracle's decline weighed on other tech shares during the day, as investors worried about AI spending and the lack of a clear timeline on returns from the investments. Still, the broader market remained steady and on Thursday, the S&P 500 inched up to finish at a record high.