Oracle's recently released earnings report fell below market expectations, delivering a significant blow to the flourishing trading of artificial intelligence (AI)-related stocks. This development has also reignited concerns in the market regarding overvaluation and the potential for bubble risks within the AI sector. Despite these challenges, the majority of investors maintain an optimistic outlook on AI and are hesitant to declare that the AI sector has reached its peak.

To fuel its AI investments, Oracle has taken on substantial debt. The company has also issued a warning that its capital expenditures for the fiscal year 2026 will surpass initial projections by $15 billion. This news triggered a sharp decline in Oracle's stock price, which plummeted by 16.5% at one stage.

In a related development, Broadcom issued a cautionary note, stating that an increase in the proportion of AI-related revenue would likely result in a decrease in profit margins. This further dampened market sentiment towards the AI sector.

Nevertheless, the overall market demonstrated resilience, with the S&P 500 index inching higher on Thursday and closing at a record high. Some investors are of the opinion that Oracle's situation is more of an isolated incident rather than indicative of a systemic risk affecting the entire AI sector.

Investors are now exercising greater selectivity when choosing stocks within the AI field. They are no longer indiscriminately assigning stock price premiums to AI-related investments. Data reveals that while short-selling interest in small- to mid-cap AI stocks has increased, the short-selling ratio for the largest beneficiaries of AI remains relatively low.