Arm Holdings Plc (ARM) shares took a hit Wednesday, falling over 5% as investors digested some unsettling news from both China and the AI infrastructure world. The sell-off reflects broader anxiety about competition in the chip space and the sustainability of massive AI spending.

China's Chip Ambitions Take a Leap Forward

According to a Reuters report, Chinese scientists have completed a prototype extreme ultraviolet (EUV) lithography machine, which is essentially the holy grail of advanced semiconductor manufacturing. This is the same critical technology used to make cutting-edge chips for artificial intelligence, smartphones, and military applications.

The prototype was finished in early 2025 and is currently undergoing testing in Shenzhen. While it can generate extreme ultraviolet light—the key ingredient for producing advanced chips—it hasn't actually manufactured working chips yet. Chinese officials are targeting 2028 for producing functional chips on this machine, though sources familiar with the project suggest 2030 is a more realistic timeline.

This development is part of China's long-running government initiative to achieve semiconductor self-sufficiency, and it's raising eyebrows across the global chip industry. The prospect of China developing its own advanced chip-making capabilities without Western technology is weighing on companies throughout the AI and semiconductor ecosystem, including Arm.

Oracle's Data Center Deal Falls Through

Adding to the pressure, the Financial Times reported that Blue Owl Capital will not provide funding for a $10 billion deal to build Oracle's next data center. Blue Owl had been negotiating with Oracle and other lenders to finance a planned 1-gigawatt data center in Michigan, but those talks have stalled and the agreement won't move forward.

The collapse leaves Oracle without a clear path to financing the facility. The funding setback comes as investors grow increasingly concerned about Oracle's rising debt levels and heavy spending on artificial intelligence infrastructure, concerns that are spilling over to other companies involved in large-scale data center development.

ARM Price Action: At publication Wednesday, Arm shares were trading 5.31% lower at $114.67, according to data from MarketDash.