Oracle stock crashes on weak forecast, elevated AI infrastructure costs

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Oracle shares slumped 15.6 per cent on Thursday, dragging other technology stocks, as concerns mounted about the company’s massive AI spending and the lack of a clear timeline on returns from the investments.

If losses hold, Oracle is poised to shed nearly US$93 billion in market value. Its peers such as Nvidia, Micron, and CoreWeave were down between 0.9 per cent and 7.7 per cent in early morning trading.

Tech investors are worried about an AI bubble, stoked by sky-high valuations, limited real-world productivity gains and complex circular investments, even as companies raise billions in debt to build infrastructure.

Oracle on Wednesday warned capital expenditures for fiscal 2026 are now expected to be $15 billion higher than the company’s estimates in September.

In a bid to compete with industry giants like Amazon, Microsoft and Google, Oracle has signed cloud-computing deals with OpenAI and others which has helped the stock climb nearly 34 per cent this year.

Analysts have said a big portion of Oracle’s capital expenditure is tied to OpenAI-related data centers.

BofA Global Research analysts, however, brushed off concerns over the inflated expenditure.

“The current weakness is more capex investment cycles needed to support demand, with the company paying the price for the abnormal speed in which investment is required to meet current AI demand trends,” they said.

Oracle’s five-year credit default swaps, which offer bondholders a hedge against default, have shot to record highs as it borrows heavily for the datacenter buildout.

The company’s closely watched metric for future cloud contracts also missed Wall Street estimates.

Oracle reported $523 billion in future contracts, below analysts’ estimates of $526 billion, according to Visible Alpha data.

The company forecast third-quarter revenue growth of between 16 per cent and 18 per cent, below the 19.4 per cent estimate of $16.87 billion, according to LSEG data.

At least 13 brokerages slashed their price targets on Oracle’s stock.

“This will be a question of patience for investors. This AI boom won’t be an overnight success, and spending in the short term is a necessity, but it will pressure margins,” said Farhan Badami, market analyst at eToro.

Oracle trades at a forward price-to-earnings ratio of 29.56, compared to rivals Microsoft at 27.24 and Amazon at 29.06, according to data compiled by LSEG.

(Reporting by Kanchana Chakravarty in Bengaluru and Danilo Masoni in London; Editing by Alun John, Sriraj Kalluvila and Leroy Leo)