For a clear signal of Wall Street's growing anxiety over the multi-billion dollar artificial intelligence (AI) investment frenzy, analysts are pointing directly at the volatile share price of software titan Oracle.
Sharp Swings on Project and Partnership News
The company's stock experienced a rollercoaster week, highlighting the market's jitters. On Wednesday, Oracle shares slumped more than five percent following a Financial Times report that a key $10 billion AI data center project in Michigan was "in limbo." The report stated that financial partner Blue Owl Capital had pulled back amid shifting lender sentiment on massive AI spending.
However, the stock rebounded on Thursday, closing up around one percent at $180.03, buoyed by a broader tech rally. The recovery was further boosted by after-hours trading, where the stock jumped more than five percent to $190.81 after Oracle was named in a new deal with TikTok. According to an internal memo from TikTok CEO Shou Chew seen by AFP, Oracle, along with Silver Lake and Abu Dhabi's MGX, will form a US joint venture to handle data protection and content moderation, allowing the app to avoid a US ban.
From Peak to Trough: The AI Poster Child's Wild Ride
Oracle, co-founded by billionaire Larry Ellison, has aggressively positioned itself as a central player in the AI infrastructure boom. This push saw its stock price peak at $345.72 in September 2024 after unveiling a massive inventory of AI work, briefly making Ellison the world's wealthiest person.
Since that high, the shares have tumbled more than 45 percent. Investors are now scrutinizing the risks of overbuilding in AI infrastructure and examining the complex financing of individual projects. "Oracle is probably the poster child for the AI investment boom," said Art Hogan of B. Riley Wealth Management, highlighting questions about "circular financing" that ties Oracle and OpenAI together in billions of dollars of business.
OpenAI CEO Sam Altman has committed to an astounding $1.4 trillion in AI computing investments, with reports suggesting about $300 billion of that could flow to Oracle.
Market Questions Sustainability Amid Debt Concerns
The recent volatility underscores a broader market reassessment. "Investors are starting to ask questions about the sustainability of the AI trade and the profitability," noted Steve Sosnick of Interactive Brokers. While the potential for AI to boost corporate profits is clear, doubts are rising over lofty valuations.
Oracle's aggressive spending is a key concern. The company is taking on significant debt to fund its data center building spree. Financial firm Morningstar, which recently trimmed its Oracle price target to $277 from $286, warned that the elevated debt "leaves little room for error." The analysts stressed that new data centers must generate cash flow quickly to service obligations, though they viewed recent setbacks as minor.
Oracle firmly denied the Financial Times report on the Michigan project. Spokesperson Michael Egbert stated that development partner Related Digital simply selected a different equity partner from a competitive group, and that final negotiations are "moving forward on schedule and according to plan."
As the AI gold rush enters a new phase, the dramatic swings in Oracle's stock price serve as a real-time gauge of Wall Street's confidence, balancing immense growth potential against the very real risks of debt, execution, and market saturation.
