Oracle Shares Plunge Amid Investor Skepticism Over AI Spending

Oracle Corporation is experiencing a severe and historic downturn in its share price. Investor confidence has been shaken by the company's aggressive financial strategy to fund its artificial intelligence expansion, triggering the most significant sell-off the stock has seen in more than twenty years.

The stock closed at $136.48 on Thursday, marking its eighth consecutive day of losses. This losing streak, the worst since May 2002, has erased approximately 25% of the equity's value in a short period. The decline represents a dramatic correction from the September peak, which was fueled by optimism surrounding a $300 billion deal with OpenAI. The current share price now sits roughly 60% below that high.

Massive Capital Raise Alarms Market

The recent wave of selling was precipitated by Oracle's announcement on Sunday of a substantial funding plan. The company intends to raise between $45 billion and $50 billion through a combination of debt issuance and new equity sales.

On Monday, Oracle concluded a bond placement worth $25 billion. An additional $20 billion is expected to be raised through share sales at market prices. While management emphasized it does not plan to take on more debt beyond this year, the market is concerned about the dilution of existing shares and potential strain on the company's balance sheet.

Should investors sell immediately? Or is it worth buying Oracle?

Questions Mount Over AI Profitability

This enormous capital requirement is driven by the aggressive build-out of data centers for clients such as OpenAI, xAI, and Meta. However, this very strategy is amplifying investor worries. According to reports from the Financial Times, banks are already attempting to resell project finance loans worth $56 billion linked to Oracle data centers in an effort to minimize their own risk exposure.

Analyst reactions have been cautious. Experts at Jefferies noted that while the financing plan "buys time" for Oracle to realize its AI ambitions, it will likely pressure margins in the near term. They warned that free cash flow may not turn positive until the 2029 fiscal year. Analysts at Deutsche Bank similarly acknowledged the short-term alleviation of funding pressure but highlighted persistent investor skepticism, noting uncertainty over whether OpenAI can fulfill and monetize its cloud commitments over the long term.

Broader Software Sector Weakness

Oracle's struggles are unfolding against a fragile backdrop for the wider software market. The entire sector is undergoing a broad correction. Kirk Materne, an analyst at Evercore ISI, currently sees "no all-clear signal" as selling pressure continues unabated. This trend is reflected in the iShares Expanded Tech-Software Sector ETF, which recently posted its worst eight-day performance in nearly six years.

Oracle's aggressive financing strategy provides the necessary capital for infrastructure expansion but pushes the timeline for profitable returns far into the future. With analyst estimates suggesting free cash flow could remain negative until FY 2029, investors are likely to keep a critical eye on the company's operational progress and the financial health of its major AI partners.