Traders work on the floor of the New York Stock Exchange, in New York City, on Tuesday.Charly Triballeau / AFP - Getty Images

Stocks dropped sharply on Wednesday as jitters about the booming artificial intelligence sector once again returned to the top of investors` minds.

The catalyst for the tumble was, once again, a story about cloud computing giant Oracle.

Before the opening bell rang, the Financial Times published a story headlined: "Oracle`s $10bn Michigan data centre in limbo after Blue Owl funding talks stall."

Blue Owl is a fund that has been the "primary backer for Oracle`s largest data center projects in the U.S.," according to the report.

In a statement Oracle said "the FT story is incorrect," but confirmed that Blue Owl was not part of the funding talks.

"Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl," a spokesman for Oracle said. "Final negotiations for their equity deal are moving forward on schedule and according to plan."

"The notion that Blue Owl walked away is unequivocally false," Related Digital said in a statement shortly after Oracle`s. The company said it expects "to deliver the project on schedule."

Despite the denials, the lack of a publicly identified funding partner for the project rattled investors and stoked fears that Oracle`s recent stumbles could spread to the rest of the AI ecosystem.

As of 1:10p.m. ET, Oracle shares were down nearly 4.5%. The stock is now down more than 40% in just the last three months, but still clinging to an 8% overall gain this year.

Oracle`s drop dragged other AI-related stocks lower as well. Some of the worst performers on the Nasdaq 100 index included chipmakers such as Broadcom and Arm Holdings, which were both down around 5%.

The Nasdaq Composite also slid more than 1%. The S&P 500 fell 0.7%.

Despite Wednesday`s drama, major indexes remain well in the green for the year that`s coming to a close. The S&P 500`s year-to-date gain is more than 14%, and the tech-heavy Nasdaq Composite`s is more than 18%.

Nvidia, the largest public company in the world and the poster child for the AI boom, dropped about 3% Wednesday morning. Advanced Micro Devices, whose business is similar to Nvidia`s, also sank 3.8%.

The ripple effect did not stop there, however.

GE Vernova, a manufacturer of gas turbines and other power systems for data centers, also slid 7.7% and was the worst S&P 500 stock. Constellation Energy and energy provider Vistra also tumbled more than 6%.

Despite Wednesday`s jitters, John Higgins at Capital Economics said he and his colleagues do not believe, "the AI rally is dead yet, and expect it to last through 2026."

"That view underpins our forecasts for strong gains in those equity markets most exposed to it, particularly the US and some of those in Asia," he wrote in an email Wednesday.

Yet Higgins cautioned, "we don`t think the good times for tech will last forever." He said that Capital Economics suspects "valuations will eventually become sufficiently stretched that a correction is likely," but not until 2027.

Investors could get a fresh read on the AI industry after the closing bell on Wednesday, when chipmaker Micron reports earnings.