Oracle(US:ORCL) Hua Er Jie Jian Wen·2025-12-12 13:55Core Viewpoint - Oracle's earnings warning has reignited concerns about an AI valuation bubble, yet Wall Street investors remain cautiously optimistic about the AI sector, with no consensus that the AI rally has peaked [1][4]. Group 1: Oracle's Performance and Market Reaction - Oracle's stock price fell by 16.5% after the company warned that its capital expenditures for fiscal year 2026 would exceed previous expectations by $15 billion [1]. - The decline in Oracle's stock also affected Broadcom, which saw a drop in after-hours trading due to concerns that increased AI business exposure would hurt profit margins [1]. - The sell-off extended to other tech stocks, raising investor concerns about the scale of AI spending and the uncertainty of investment returns [4]. Group 2: Market Sentiment and Analysis - Despite the sell-off, the S&P 500 index rose slightly, reaching a new all-time high, indicating broader market resilience [4]. - Analysts suggest that Oracle's issues are specific to the company and do not reflect a systemic crisis in the AI sector [5]. - Notable investors, including Michael Burry, have compared the current AI hype to the 1990s internet bubble, but short-selling activity is primarily focused on smaller companies, with limited short positions on leading AI stocks [4][5]. Group 3: Changing Investor Attitudes - Investor criteria for AI investments are becoming more stringent, with a notable shift in the correlation between capital expenditures and stock prices [5]. - Meta's stock dropped by 11% after announcing significant increases in capital expenditures, highlighting the market's changing response to aggressive AI investments [5]. - Market participants believe that Oracle's challenges are more of an isolated incident rather than indicative of a broader issue within the AI investment landscape [6]. Group 4: Short Selling and Market Dynamics - There is a rising willingness among investors to short smaller AI stocks, but major AI beneficiaries remain lightly shorted [7]. - Despite some setbacks for leading AI stocks, the broader market continues to perform strongly, with technology stocks comprising 35% of the S&P 500 index [7]. - Concerns persist that a decline in enthusiasm for high-flying AI stocks could negatively impact the overall market, which has seen a 17% increase this year [7].