Oracle Corp. shares have fallen more than 50% from last year’s all-time high as investors concerned about the artificial intelligence trade and the company’s links to OpenAI flee the stock.
The stock’s decline has erased about $463 billion in market value from a record hit on Sept. 10 after the company reported an impressive outlook for its cloud business that pointed to soaring demand for AI. The rally brought Oracle’s valuation to more than $933 billion, making it the 10th most valuable publicly-listed US company at the time.
The swift decline in Oracle shares has been amplified by growing investor concern over AI as the biggest technology companies continue to pledge billions of dollars in capital expenditures to build out data centers, in some cases without a clear return on investment. Added to the mix are circular deals between OpenAI, a private company that’s not profitable, and companies such as Oracle and Nvidia. Oracle has also raised tens of billions of dollars of bonds recently through note sales in its name and indirectly through projects it’s backing.
“There’s some assumptions built in here about what OpenAI is going to spend and where are they getting that money and, you know, is this really going to happen,” said Eric Diton, president and managing director of Wealth Alliance, an investment advisory firm. “Maybe Oracle stock got way ahead of fundamentals and now the market’s saying, alright, show me, I wanna see it.”
Oracle’s December earnings report kicked off the most recent leg lower, as the company said it ramped up spending on AI data centers, feeding concerns about how long it will take for the expenditures to pay off. A measure of Oracle’s credit risk jumped to its highest level since 2009 following the report.
Shares have also been weighed down by news that Blue Owl Capital, which has helped finance data center projects for Oracle and Meta Platforms Inc, is not included in final negotiations on an equity deal for a data center project in Michigan. Oracle said the negotiations are “on schedule.”
It’s also been caught up in a broader selloff in software stocks, which have seen valuations compressed as investor concern about disruption from AI mount. Anthropic’s mid-January release of a new AI tool weighed on software stocks.
Written by: Carmen Reinicke @Bloomberg
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