Oracle has been hit harder than Big Tech rivals in the recent sell-off of tech stocks and bonds, as its vast borrowing to fund a pivot to artificial intelligence unnerved Wall Street.
The US software group founded by Larry Ellison has made a dramatic entrance to the AI race, committing to spend hundreds of billions of dollars in the next few years on chips and data centers—largely as part of deals to supply computing capacity to OpenAI, the maker of ChatGPT.
The speed and scale of its moves have unsettled some investors at a time when markets are keenly focused on the spending of so-called hyperscalers—big tech companies building vast data centers.
Oracle shares are down 25 percent in the past month, nearly twice the fall of the next worst-performing hyperscaler, Meta.
The slide has reversed more than $250 billion of gains in its market value when the Texas-based group disclosed its deals with OpenAI in September. A Financial Times index tracking the price of Oracle’s debt has fallen about 6 percent since mid-September, significantly worse than any of its major peers.
Oracle has prompted particular concern because the group shifted from business software to cloud computing later than its rivals. Its strategy has become more focused on an all-out bet on AI, pinned largely to the success of OpenAI.
“This is a completely different business model to what investors prize in cloud services,” said Alex Haissl at Rothschild & Co Redburn. “The deals look fantastic when you look at the revenue figures, but they are very capital-intensive so create very little value.”
Investors are concerned about lofty valuations and huge capital expenditure by a few large tech groups that could backfire if a handful of lossmaking AI start-ups such as OpenAI and Anthropic fail to deliver on their promises for the technology.