Oracle's Stock Plunges 30% as $300 Billion OpenAI Bet Spooks Investors
Oracle's stock suffers a 30% quarterly plunge, its worst since 2001. Despite a $300B deal with OpenAI, concerns over debt and margin compression dominate investor sentiment.
It's the steepest decline since the dot-com bust in 2001. Oracle shares have plummeted 30% so far this quarter, even as it locks in a massive partnership with OpenAI. Investors are growing skeptical about the database giant's ability to deliver on its promise of building massive server farms for the ChatGPT maker.
A Mountain of Debt and Missed Targets
According to Reuters, Oracle reported weaker-than-expected quarterly revenue and free cash flow earlier this month. The new finance chief, Doug Kehring, announced that capital expenditures for fiscal 2026 would hit $50 billion, which is 43% higher than previous estimates. This aggressive spending spree aims to boost cloud capacity but comes at a significant cost.
The Shift from Software to Infrastructure
Oracle is pivoting from its high-margin core software business to AI infrastructure, centered on Nvidia GPUs. While CEO Larry Ellison envisions a future where revenue reaches $225 billion by 2030, this growth requires sacrificing short-term profitability.
Despite the sell-off, some bulls remain unfazed. Lountzis Asset Management recently added more shares, viewing the drop as a "healthy correction." They're betting on Ellison’s track record, noting that he has "seen the future" for the last 50 years. Additionally, a recent deal with TikTok to sell part of its U.S. business to Oracle-led investors provided a slight temporary bump to the stock.
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