Oracle shares fall over 50% as AI spending and OpenAI deals worry investor

Oracle Corp.’s shares have dropped more than 50% from last year’s all-time high because investors are worried about AI and the company’s connection to OpenAI. The stock’s fall has erased about $463 billion from Oracle’s record market value reached on Sept. 10 after a strong cloud business forecast showed big demand for AI. At its peak, Oracle was worth over $933 billion, making it the 10th most valuable US public company at the time, as Bloomberg.

AI spending worries investors

The decline is made worse by investors worrying about AI as top tech companies spend billions on data centers with unclear returns. Investors are also concerned about circular deals between Oracle, Nvidia, and OpenAI, which is private and not profitable.

Oracle has recently raised tens of billions in bonds, both in its name and through projects it supports, adding to investor caution. Eric Diton, president of Wealth Alliance, said, “Maybe Oracle stock got way ahead of fundamentals and now the market’s saying, alright, show me, I wanna see it”.

December earnings trigger drop

Oracle’s December earnings report triggered the latest drop as the company said it increased spending on AI data centers, raising concerns about when these costs will pay off. After the earnings, a measure of Oracle’s credit risk hit its highest level since 2009. Shares were also hurt by news that Blue Owl Capital, which financed Oracle and Meta data center projects, is not part of final equity deal talks for a Michigan project.

Oracle said negotiations are “on schedule”, as stated by as stated by Bloomberg. Oracle’s stock drop is part of a broader selloff in software stocks, which are losing value as investors worry about AI disruption. The release of a new AI tool by Anthropic in mid-January added pressure on software stocks, including Oracle.

FAQs

Q1. Why did Oracle stock fall so much?

Oracle shares dropped mainly due to worries about AI costs, OpenAI deals, and rising debt.

Q2. How does AI affect Oracle’s business?

Oracle spends heavily on AI data centers, and investors are unsure when it will make profit.