Oracle shares tumbled 13% on Thursday, triggering a broader tech selloff. The drop came after the company issued weak forecasts and revealed soaring spending levels, raising new doubts about how quickly major AI investments will generate returns.
The disappointing guidance from one of OpenAI’s key cloud partners highlights the uneven early results of generative AI. Many executives continue to promote AI as the future of productivity, yet tangible gains remain limited.
Oracle, traditionally a smaller player in cloud computing, surged into the AI infrastructure race this year through a $300 billion deal with OpenAI. However, the partnership has tied its performance closely to the ChatGPT developer. Recent concerns that Google may be pulling ahead of OpenAI have added pressure to Oracle’s stock.
Investors have also been selling Oracle bonds due to fears about its debt-funded AI expansion. Credit-default swaps (CDS), which protect bondholders from default, jumped nearly 12 basis points on Thursday to their highest level in at least five years. Oracle currently holds around $100 billion in debt.
This trend mirrors a wider shift in Big Tech. Companies such as Meta and Amazon have collectively sold more than $45 billion in bonds this year, marking a rare turn toward heavy borrowing for firms that historically relied on cash flow to fund innovation.
Tech leaders argue that significant spending is essential to remain competitive in AI, calling underinvestment a greater risk than overspending.
Oracle has burned roughly $10 billion in cash in the first half of its fiscal year due to AI-related costs. If the stock decline continues, the company could lose more than $90 billion in market value. For founder Larry Ellison, whose family is also backing Paramount Skydance’s $108 billion bid for Warner Bros. Discovery, the loss could exceed $30 billion.
Ellison remains the world’s second-richest person with a net worth of $276 billion, driven largely by his roughly 40% stake in Oracle.
Tech Shares Slide as AI Bubble Fears Return
Other major AI-linked stocks also fell. Nvidia, AMD, Micron, Broadcom, and Arm dropped between 3.1% and 4.2%, dragging the Nasdaq to a one-week low.
Optimism around the AI boom has recently been overshadowed by concerns that valuations have reached unsustainable levels. Some analysts now compare the enthusiasm to the late-1990s dot-com bubble.
These concerns have intensified due to circular investment structures involving OpenAI, which carries a valuation near $500 billion despite ongoing losses and unspecified plans to fund more than $1 trillion in AI infrastructure commitments by 2030.
Oracle announced on Wednesday that its spending outlook for fiscal 2026 is now $15 billion higher than estimates provided in September. The company also missed Wall Street expectations for a key cloud-contract metric and issued weaker-than-expected revenue guidance for the third quarter.
At least 13 brokerages lowered their price targets following the report. Still, some analysts defended Oracle’s strategy, arguing that the spending surge reflects the extraordinary pace of AI demand growth.
Analysts at BofA Global Research said the weakness reflects the “abnormal speed” at which capital spending must ramp up to meet current AI trends.
Oracle now trades at a forward price-to-earnings ratio of 29.56. For comparison, Microsoft trades at 27.24 and Amazon at 29.06, according to LSEG data.
