The European Business Review·2025-12-12 09:59Core Viewpoint - Oracle's stock experienced a significant decline of 13 percent, raising concerns about the company's heavy investments in AI infrastructure and their potential returns, amidst a broader pullback in the tech sector [1]. Financial Performance - Oracle's updated forecasts did not meet Wall Street expectations, highlighting the inconsistent financial impact of emerging AI technologies [2]. - The company has incurred approximately 10 billion dollars in cash burn in the first half of its fiscal year due to AI-related investments [5]. - Oracle's capital spending for fiscal 2026 is projected to exceed previous estimates by 15 billion dollars, alongside missed estimates for future cloud commitments and a revenue outlook that fell short of expectations [7]. Market Reaction - The decline in Oracle's stock triggered a selloff in other AI-related companies, with stocks like Nvidia, AMD, Micron, Broadcom, and Arm Holdings dropping between 3.1 and 4.2 percent [6]. - Oracle bonds faced heavy selling, with credit default swaps climbing nearly 12 basis points, indicating increased default risk concerns due to the company's substantial debt of close to 100 billion dollars [3]. Investment Strategy - Oracle's aggressive investment strategy is reflective of broader industry trends, with other companies like Meta and Amazon also engaging in significant bond issuance to fund long-term innovation [4]. - Analysts suggest that the elevated investment levels are necessary to meet current AI demand trends, with Oracle's forward price-to-earnings multiple at 29.56, slightly higher than Microsoft and in line with Amazon [8].