Oracle’s stock plunged 13 percent on Thursday, triggering a wider pullback across the tech sector as investors questioned whether the company’s heavy spending on artificial intelligence infrastructure will generate returns fast enough to justify the risk. The drop highlighted growing unease in markets as enthusiasm for AI gives way to concerns about inflated valuations and uncertain timelines for profitability.
The company’s updated forecasts, which fell short of Wall Street expectations, underscored the uneven financial impact of emerging AI technologies. Oracle has rapidly repositioned itself this year through a sprawling 300 billion dollar cloud agreement with OpenAI, placing the long-time software provider at the center of AI model training and deployment. Yet that same partnership has tied its market performance to the fortunes of the ChatGPT developer at a time when investors fear Google is gaining ground.
The anxiety has spread beyond equities. Oracle bonds faced heavy selling as markets digested the scale of the firm’s debt-driven expansion. Credit default swaps on the company climbed nearly 12 basis points, hitting a five-year high, reflecting the cost of insuring against default risk for a business carrying close to 100 billion dollars in debt.
Its aggressive investment strategy mirrors trends across the industry. Meta has issued more than 30 billion dollars in new bonds and Amazon has tapped the market for 15 billion dollars, signaling a shift away from cash-based financing for long-term innovation. Executives have defended the capital outlays as essential for building the infrastructure needed to run the next generation of AI systems, arguing that falling behind would pose a far greater risk.
Still, Oracle’s balance sheet is under strain. The company has burned through roughly 10 billion dollars in cash in the first half of its fiscal year due to AI-related construction and hardware procurement. If Thursday’s losses persist, it stands to shed more than 90 billion dollars in market value. For Larry Ellison, who holds around 40 percent of Oracle’s shares, the decline could wipe more than 30 billion dollars from his personal net worth.
The selloff spilled into other AI-linked names. Nvidia, Advanced Micro Devices, Micron, Broadcom and Arm Holdings all slipped between 3.1 and 4.2 percent, dragging the Nasdaq to its lowest level in a week. The downturn comes as some analysts warn that the AI boom may be repeating patterns seen during the dot-com era, especially in light of complex and opaque financial arrangements surrounding OpenAI, which carries a valuation of about 500 billion dollars yet continues to operate at a loss.
Oracle intensified those concerns on Wednesday when it revealed that capital spending for fiscal 2026 will exceed its September projections by 15 billion dollars. It also missed estimates for future cloud commitments and issued a revenue outlook for the next quarter that fell short of expectations. At least 13 brokerages cut their price targets following the announcement.
Others, however, argued that the elevated investment levels are unavoidable. Analysts at BofA Global Research said, “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.”
Oracle now trades at a forward price-to-earnings multiple of 29.56, slightly higher than Microsoft and roughly in line with Amazon, according to LSEG data. For markets already sensitive to policy uncertainty and elevated borrowing costs, the company’s trajectory is emerging as a key test of whether the AI buildout can sustain its momentum or whether investors are recalibrating expectations after a year of unprecedented hype.
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