🔗 Share this article

The tech firm's lackluster quarterly results have slashed more than $70bn from the worth of the software and data company co-founded by Trump ally Larry Ellison, adding to mounting fears of a overheated market in artificial intelligence stocks.

Steep Stock Decline Comes After Sales Miss

Shares in the firm tumbled by over 11 percent overnight after it disclosed a disappointing 14 percent increase in revenues to $16bn in the most recent quarter, while simultaneously announced plans to increase its AI spending by around $fifteen billion dollars.

The business reported weaker-than-expected quarterly revenues for the quarter ending in November, with revenue growth at its core cloud computing division expanding at a more modest rate than anticipated, at 34 percent.

Market Concerns Over Spending and Leverage

Shareholders were further disappointed by a slower than expected 68% growth in revenues from its cloud infrastructure unit.

At the same time, investors were alarmed by the firm's increased forecasts for spending on artificial intelligence. It now anticipates capital expenditure to jump by 40% to $fifty billion dollars, with the lion's share of the increase allocated for building data centres.

This heavy investment strategy comes amid a ballooning leverage, with Oracle's corporate debt having surged by 25% over the past year to reach $nearly one hundred billion dollars.

"Honestly, the report was not dramatically bad, but it came to confirm worries around heavy AI spending, financed by debt, with an uncertain timeframe for returns," said a senior analyst.

Broader Market Repercussions and Ecosystem Risks

Continued excitement about the potential of AI technology has led to a leap in market capitalizations in recent months, but there has been a increasing chorus of warnings from policymakers and executives who say stock market valuations could correct sharply if investors ended up being disappointed by the development or adoption of AI solutions.

While Oracle has established itself as a key tech player creating enterprise solutions for major corporations worldwide and has more recently grown rapidly in cloud computing, analysts point to growing concerns about how dependent firms are becoming on each other’s financing within the AI ecosystem.

Oracle said that its measure of revenue from customer contracts rose by 440 percent over the last twelve months. However, analysts were skeptical when it was revealed that these commitments were driven by new commitments from major customers like Meta and Amazon.

"Although these are two solid customers, it will not allay fears that big tech's AI investments are self-referential, which leaves it vulnerable to a loss of investor confidence," observed a market strategist.

"Overall, robust backlog increase was not enough to placate anxiety about AI and the enormous amount of investment spending required by firms to construct AI capacity."

Broader Sell-Off in Tech Shares

Additional AI and tech-related stocks also slid in extended trading following the Oracle report. Key movers included:

• Nvidia: Share price declined by 1.3%.
• Alphabet (Google): Stock declined by 0.3 percent.
• SoftBank: In Japan, the investment firm's shares tumbled by 7.7 percent on Thursday.