Oracle shares heading for worst quarter since 2001 following AI investment concerns

Core Viewpoint - Oracle's stock has experienced a significant decline, dropping 30% in the current quarter, marking its worst performance since the dot-com crash in 2001 [1][8]. Financial Performance - Oracle reported weaker-than-expected quarterly revenue and free cash flow earlier this month, prompting the new finance chief to announce a capital expenditure plan of $50 billion for fiscal 2026, which is 43% higher than the previous plan and double the amount from the previous year [4]. - The company is also planning $248 billion in leases to enhance cloud capacity, alongside building new data centers, indicating a substantial financial commitment [4]. Debt and Investment Concerns - In September, Oracle raised $18 billion through a bond sale, one of the largest in the tech sector, but investor confidence is waning, leading to increased costs for insuring Oracle's debt [5]. - Analysts express concerns about Oracle's ability to meet its financial obligations without restructuring its contract with OpenAI, especially given its precarious investment-grade rating [6]. Market Reaction and Future Outlook - Following the announcement of a significant revenue backlog tied to OpenAI, Oracle's stock initially surged nearly 36%, reaching an intraday high of $345.72 per share [9]. - However, the stock later fell 43%, closing at $197.49, despite a brief recovery after TikTok's agreement to sell part of its US business to Oracle [12]. - Wall Street analysts are divided on Oracle's long-term growth prospects, with some expressing skepticism about the company's heavy reliance on OpenAI and the timeline for projected growth [15][16].