Finance
Oracle slumps as gloomy forecasts, soaring spending fan AI bubble worries
Published by Global Banking and Finance Review
Posted on December 11, 2025
Last updated: January 7, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on December 11, 2025
Last updated: January 7, 2026
By Aditya Soni and Kanchana Chakravarty
Dec 11 (Reuters) - Oracle shares sank 13% on Thursday, sparking a tech selloff as the company's massive spending and weak forecasts fanned doubts over how quickly the big bets on AI will pay off.
The disappointing predictions from the crucial OpenAI cloud-computing partner show the uneven returns from the nascent technology that many business leaders believe is the future but has so far yielded limited productivity gains.
Oracle, long a smaller cloud player, has vaulted into the artificial intelligence infrastructure race this year thanks to a $300 billion OpenAI deal. But the pact has also tethered the company's fortunes to the ChatGPT maker, with shares sliding in recent weeks on concern Google is pulling ahead of OpenAI.
Investors have also dumped Oracle bonds on worries about its debt-fueled AI build-out, while piling into credit-default swaps (CDS) that offer bondholders a hedge against default. CDS for the company, which has around $100 billion in debt, rose by nearly 12 basis points on Thursday to at least five-year highs.
Big Tech's rising appetite for debt, including bond sales of more than $30 billion by Meta and $15 billion from Amazon.com, has marked a departure for the companies that long depended on strong cash flows to fund spending on new initiatives.
Tech executives have said the outlays are necessary for a technology that will transform work and make businesses more efficient, arguing the bigger risk is underinvesting, not overspending.
Oracle, which has burned around $10 billion in cash in the first half of its fiscal year due to the AI investments, was set to lose more than $90 billion in market value if the losses hold. For Larry Ellison, whose family is behind Paramount Skydance's $108 billion pursuit of Warner Bros Discovery, the net worth hit could total more than $30 billion.
Ellison, who is the world's second-richest man mostly due to his roughly 40% stake in Oracle, has a net worth $276 billion, according to the Forbes real-time billionaire list.
TECH SHARES FALL
Other AI stocks, including chip giant Nvidia, Advanced Micro Devices, Micron, Broadcom and Arm Holdings, also fell between 3.1% and 4.2%. That pushed down the tech-heavy Nasdaq to a one-week low.
Optimism about the AI trade has in recent months given way to fears that the frenzy driving up stocks to sky-high valuations has turned into a bubble reminiscent of the 1990s dot-com boom.
Some of those fears have stemmed from circular deals involving OpenAI, which has a valuation of about $500 billion but still loses money and has not detailed how it plans to fund AI spending commitments of more than $1 trillion by 2030.
Oracle, much of whose capital expenditures are tied to OpenAI, said on Wednesday that spending for fiscal 2026 is now expected to be $15 billion higher than its September estimates.
It missed Wall Street estimates for a closely watched metric for future cloud contracts and issued a third-quarter revenue growth forecast that was below Wall Street estimates.
At least 13 brokerages slashed their price targets on Oracle's stock. But some brushed off concerns, saying the spending was necessary.
"The current weakness is more capex investment cycles needed to support demand, with the company paying the price for the abnormal speed in which investment is required to meet current AI demand trends," BofA Global Research analysts said.
Oracle trades at a forward price-to-earnings ratio of 29.56, compared with rivals Microsoft at 27.24 and Amazon at 29.06, according to data compiled by LSEG.
(Reporting by Kanchana Chakravarty in Bengaluru and Danilo Masoni in London; Editing by Sriraj Kalluvila and Leroy Leo)
Artificial intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and learn. AI technologies are increasingly used in various sectors, including finance, to enhance efficiency and decision-making.
Market valuation is the process of determining the current worth of an asset or a company based on its market price. It reflects investor perceptions and can fluctuate based on market conditions.
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