Oracle Corporation is facing significant investor skepticism despite making substantial investments in artificial intelligence to drive future growth. The technology giant's stock has experienced a dramatic decline, falling nearly 40% from its September peak and dropping below the critical $200 threshold for the first time since reaching its all-time high.
The Steep Decline in Oracle's Market Value
Oracle's stock price collapsed from its record high of $345.72 on September 10 to a daily low of $193.55 during Friday's trading session. This represents the first time the company's shares have traded below the $200 level since September, marking a significant downturn for the tech behemoth. The stock has also broken below its 20-week simple moving average, a key long-term support level that had been maintained throughout most of 2024.
Interestingly, despite the sharp price decline, Oracle's Relative Strength Rating actually improved slightly, moving from 80 to 83 on Thursday. This technical indicator suggests some underlying strength, though it has done little to reassure nervous investors.
The OpenAI Partnership Backlash
The beginning of Oracle's stock troubles coincided with the company's landmark partnership announcement with OpenAI. Rather than celebrating the deal, investors reacted with concern about Oracle's substantial bet on the ChatGPT maker. Since the partnership revelation, Oracle has witnessed approximately $360 billion evaporating from its market valuation.
Market analysts note that Oracle's heavy reliance on OpenAI for future revenue growth is particularly worrying. Reports indicate that around 65% of Oracle's projected additional revenue is tied to just one customer - OpenAI. This concentration risk has made investors increasingly nervous about the company's growth prospects.
Mounting Debt and Infrastructure Concerns
Oracle is borrowing aggressively to fund AI infrastructure development, with total debt now surpassing $100 billion according to financial reports. The company plans to further increase its substantial debt load to finance artificial intelligence infrastructure projects, primarily to support OpenAI's data center requirements.
This massive debt accumulation comes at a time when lenders are seeking greater protection on loans to major technology companies, citing concerns over debt-financed AI investments. Investors are treating Oracle as a public market proxy for OpenAI's ambitions, meaning any stumbles in OpenAI's progress could directly impact Oracle's financial performance.
The company's ambitious plan to reach $166 billion in cloud revenue by 2030 has failed to impress market participants, who remain cautious about the AI sector overall. This caution extends beyond Oracle to other AI-focused tech stocks, including industry leader Nvidia, as speculation grows about a potential AI bubble developing in the market.
