The tech firm's underwhelming quarterly results have slashed more than $70bn from the market capitalization of the software and data giant established by billionaire Larry Ellison, intensifying growing fears of a speculative bubble in artificial intelligence stocks.
Sharp Share Price Fall Follows Revenue Miss
Stock in the firm fell sharply by eleven and a half percent in after-hours trading after it posted a disappointing fourteen percent rise in sales to $16 billion in the latest quarter, as it simultaneously revealed plans to boost its artificial intelligence investment by about $15bn.
The enterprise posted weaker-than-expected three-month sales for the period ending in November, with sales at its core cloud services business expanding at a slower pace than anticipated, at 34 percent.
Investor Jitters Over Spending and Leverage
Markets were also disappointed by a slower than expected sixty-eight percent increase in income from its infrastructure business.
At the same time, the market were alarmed by the firm's raised projections for AI investment. It now expects capex to surge by forty percent to $50 billion, with the vast majority of the additional spending allocated for building server farms.
This substantial investment strategy is set against a growing leverage, with Oracle's long-term debt having surged by 25 percent over the last twelve months to reach $99.9 billion.
"Frankly, the report was not dramatically bad, but it came to confirm concerns around heavy AI spending, funded through debt, with an uncertain timeframe for returns," said a senior analyst.
Wider Market Repercussions and Industry Concerns
Continued exuberance about the capabilities of AI tech has fueled a leap in market capitalizations in the past year, but there has been a rising number of cautions from regulators and executives who argue stock market valuations could tumble if investors ended up being disappointed by the progress or commercial uptake of AI technology.
While Oracle has become an important technology provider developing software for major firms worldwide and has in recent years grown rapidly in cloud computing, analysts point to growing questions about how dependent firms are becoming on circular funding within the artificial intelligence industry.
Oracle said that its metric of revenue from customer contracts soared by 440 percent over the past year. However, market watchers were wary when it emerged that these contracts were propelled by large deals from major customers like Meta and Amazon.
"Although these are two solid customers, it will not placate fears that big tech's AI investments are self-referential, which leaves it vulnerable to a loss of market faith," commented a market strategist.
"Overall, strong contract growth was not enough to calm anxiety about AI and the enormous amount of capital expenditure required by companies to develop AI infrastructure."
Broader Sell-Off in AI-Related Stocks
Other AI and tech-related stocks subsequently slid in extended trading following the Oracle report. Key movers included:
- Nvidia: Share price dropped by 1.3 percent.
- Alphabet (Google): Stock fell by 0.3%.
- SoftBank: In Japan, the investment firm's shares tumbled by 7.7% on Thursday.
