🔗 Share this article

The tech firm's lackluster quarterly results have erased more than $70bn from the market capitalization of the enterprise software giant established by billionaire Larry Ellison, intensifying mounting fears of a speculative bubble in artificial intelligence stocks.

Steep Stock Fall Follows Revenue Miss

Shares in the firm plunged by over 11 percent overnight after it posted a disappointing 14 percent rise in revenues to $16 billion in the previous quarter, as it simultaneously announced plans to boost its artificial intelligence investment by approximately $15bn.

The business posted disappointing quarterly revenues for the quarter ending in November, with revenue growth at its core cloud computing business growing at a slower pace than anticipated, at 34%.

Market Jitters Over Spending and Debt

Markets were further disappointed by a more moderate 68 percent increase in revenues from its infrastructure business.

At the same time, investors were unnerved by the company's elevated forecasts for spending on artificial intelligence. It now expects capex to jump by 40 percent to $50 billion, with the bulk of the additional spending directed toward constructing data centres.

This aggressive investment strategy is set against a growing leverage, with Oracle's corporate debt having increased by twenty-five percent over the past year to reach $99.9bn.

"Frankly, the earnings release was not dramatically bad, but it served to reinforce fears around heavy AI spending, funded through debt, with an unknown timeframe for revenue generation," commented a senior analyst.

Wider Market Repercussions and Ecosystem Risks

Continued optimism about the potential of AI tech has led to a leap in stock prices in the past year, but there has been a increasing chorus of warnings from policymakers and business leaders who warn stock market valuations could plummet if the market become disappointed by the progress or commercial uptake of AI solutions.

While Oracle has become an important technology provider creating enterprise solutions for large corporations worldwide and has more recently found strength in cloud computing, analysts point to increasing concerns about how reliant companies are growing on each other’s financing within the artificial intelligence industry.

Oracle reported that its metric of remaining performance obligations soared by 440% over the past year. However, market watchers were skeptical when it emerged that these commitments were propelled by large deals from other tech giants like Meta and Amazon.

"Although these are two solid customers, it will not allay fears that the tech sector's AI investments are self-referential, which makes the sector susceptible to a erosion of market faith," observed a market strategist.

"Overall, strong contract growth was not enough to calm anxiety about AI and the huge amount of capital expenditure needed by firms to build AI capacity."

Broader Sell-Off in AI-Related Stocks

Additional technology stocks also declined in extended trading following the Oracle results. Key performers included:

• Nvidia: Stock declined by 1.3 percent.
• Alphabet (Google): Stock fell by 0.3%.
• SoftBank: In Japan, the investment firm's shares plunged by 7.7% on Thursday.