Oracle Stock Is Getting Whacked. Is the AI Trade a 'Show Me Story' Now?

Core Insights - Investors are increasingly skeptical about AI-driven growth, particularly following Oracle's disappointing earnings report, which raised concerns about an AI bubble fueled by debt-laden investments [1][3][8] Company Performance - Oracle's shares fell nearly 15%, reaching six-month lows, after a period of significant growth where they doubled in value from January to early September [1] - The company's backlog increased by nearly $70 billion last quarter, totaling $523 billion, but concerns remain about reliance on OpenAI for future revenue [5][6] Market Reaction - Other AI-related stocks, including Nvidia, Palantir, and Broadcom, also experienced declines of over 3% [2] - The market's reaction indicates a shift towards demanding tangible proof of AI's commercial benefits rather than accepting optimistic narratives [3][8] Investment Concerns - Oracle's capital expenditures reached $12 billion last quarter, exceeding Wall Street's expectations by $4 billion, and the full-year capex target was raised to $50 billion from $35 billion [7] - Analysts express concerns about Oracle's ability to convert its growing backlog into sustainable revenue, with some describing the situation as a "show-me story" [8] Debt Financing - Oracle has heavily financed its data center expansion, selling $18 billion in debt in September, one of the largest bond sales by a tech company [9] - There is a growing trend of investors bidding up Oracle's credit default swaps, indicating increased concern over the company's debt obligations [9]