Oracle Shares Plunge as Analyst Questions AI Strategy Validity

Oracle investors faced a significant setback on Thursday as the technology giant's stock plummeted more than 4%. The sharp decline followed scathing criticism from market researchers targeting the company's billion-dollar artificial intelligence initiatives and raising doubts about the substance behind Oracle's celebrated $455 billion backlog.

The downturn was triggered by a critical analysis from D.A. Davidson analyst Gil Luria, who characterized Oracle's aggressive AI expansion as "irresponsible investment." Luria expressed substantial skepticism regarding the quality of the much-publicized contract backlog, asserting that billion-dollar commitments from major partners like OpenAI represent flexible arrangements rather than binding obligations with fixed purchase requirements.

This critique strikes at the core of Oracle's recent valuation narrative. The corporation has heavily anchored its market positioning in recent months on expectations that the enormous backlog would progressively convert into substantial revenue and profit streams. Now, this fundamental premise faces serious scrutiny.

Accounting Practices Under Examination

Further pressure emerged from ongoing discussions about questionable accounting methodologies within the technology sector. Noted investor Michael Burry recently highlighted concerns that numerous corporations, including Oracle, are depreciating their AI infrastructure over unusually extended timeframes. This practice potentially results in artificially inflated earnings that mask the true costs associated with the AI boom.

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

Market reaction reflected heightened anxiety. Trading volume surged to approximately 29.3 million shares—nearly double the daily average. Oracle's stock concluded the session at 217.57 euros after dipping as low as 215.22 euros during Thursday's trading.

Diverging Perspectives on Oracle's Trajectory

Not all market observers share this pessimistic outlook. A Mizuho Securities analyst reaffirmed a "Buy" rating on Thursday, contending that the market correction appears exaggerated. The analyst maintained that Oracle remains well-positioned heading into its December quarterly report.

Nevertheless, the crucial question persists: Can Oracle demonstrate that its massive contract backlog will genuinely transform into profitable revenue streams? The upcoming December earnings call represents a critical test. Investors await concrete data regarding revenue conversion rates, margin performance, and cloud division profitability—determining whether the AI enthusiasm rests on solid foundations or precarious assumptions.