Oracle stock slipped 3% on Tuesday after a report from The Information that raised questions about the company's plans to buy billions of Nvidia chips to rent as a cloud provider to clients like OpenAI.
Oracle had 14% gross margins on $900 million in sales in its Nvidia cloud business in the three months ending in August, according to the report, which cited internal documents. That's significantly lower than Oracle's overall gross margin of around 70%.
The report said that Oracle's recent transformation into one of the most important cloud and artificial intelligence companies may run into profitability challenges because of how expensive Nvidia chips are and aggressive pricing on its AI chip rentals.