Oracle, a longtime leader in database software and cloud services, experienced a dramatic stock decline in late 2025. Shares reached an all-time high of approximately $328 in September 2025 but have since fallen to around $188 as of mid-December, representing a drop of over 40%.
The correction has led to billions of dollars in market value losses and contributed to wider selling in AI-related stocks. The plunge accelerated following the company’s fiscal second-quarter 2026 earnings release on December 10, 2025, which disappointed investors despite signs of strong future demand.
The pressure had already begun earlier. On November 18, 2025, Oracle’s market value had dropped by $315 billion since its OpenAI deal on September 10, which analysts dubbed the “curse of ChatGPT.” The market cap eroded further, falling to $533 billion, down from $927 billion in September.
Oracle is not the only company tied to OpenAI whose shares plunged. Japanese technology conglomerate SoftBank Group, a key investor in OpenAI, saw its shares drop by 40% between October 31 and November 26, resulting in a loss of nearly $50 billion in market capitalisation.
A Disappointing Q2 Earnings Report
Oracle’s Q2 results revealed a mismatch between explosive demand for AI infrastructure and the company’s ability to convert it into immediate revenue.
While remaining performance obligations, a key metric for future cloud contracts, rose to $523 billion year over year, revenue growth fell short of Wall Street expectations. The company also issued third-quarter guidance below estimates, citing ongoing investments needed to meet demand.
Massive Investment in AI Data Centres
A major concern for investors is Oracle’s aggressive spending on AI data centres. In recent months, the cloud has emerged as a key player in AI after a $300 billion deal with OpenAI was disclosed in September, under which the startup will buy computing power over about five years starting in 2027.
Oracle said capital expenditures for fiscal 2026 are now expected to be about $15 billion higher than earlier estimates, after the company burned around $10 billion in cash in the first half of the year. Executives said on a post-earnings call that total capital spending is projected to reach about $50 billion in the fiscal year ending May 2026.
To fund this buildout, Oracle raised $18 billion in new debt, pushing total debt over $100 billion. These investments are necessary to energise capacity for AI workloads, but they are pressuring near-term profitability and free cash flow.
Massive spending across the sector, with limited immediate returns, has raised questions about whether the hype is outpacing reality. “Oracle already has a huge amount of debt. Their balance sheet’s not that good. At some point, they’ll heed the warning of the bond market and slow things down,” said Jim Cramer of CNBC. He added that data centres involve high costs and execution challenges, and that Oracle should not put its balance sheet at risk to support Sam Altman’s plans.
Analysts have raised concerns about Oracle’s ability to fund its expansion plans.
“Ultimately, it comes down to ‘how is Oracle going to raise the money?’” RBC Capital Markets analyst Rishi Jaluria told WSJ. “It’s one thing to build a backlog, but having that backlog translate to revenue shows the ability to actually meet those demands.”
However, not all analysts share this view.
Bank of America analyst Brad Sills told TheStreet, “We view the current mismatch of spend versus revenue as an investment curve issue rather than a change in fundamentals.”
The analyst said the near-term pressure stems from the need for higher capital spending to meet demand, with Oracle absorbing the impact of the rapid pace of investment required by current AI demand trends.
Sills said the company’s core business remains strong, pointing to growing AI demand, data centre projects moving on schedule and Oracle Cloud Infrastructure’s ability to support different platforms and contract types. He added that Oracle’s management has reiterated that the company retains access to multiple financing channels and remains committed to maintaining its investment-grade credit rating.
Oracle is not Alone
Oracle’s surge in capital spending comes amid a broader wave of investment by major cloud providers racing to meet AI demand, though the scale of spending and balance sheet impact varies.
Google expects full-year 2025 capital expenditures of between $91 billion and $93 billion, while Meta has allocated $64 billion to $72 billion, with plans for further increases. Microsoft spent about $80 billion on AI cloud workloads and data centres.
Amazon leads the group, with estimated investments of $100 billion to $125 billion focused on AI capabilities and cloud infrastructure. The company has also announced plans to invest up to $50 billion to expand AI and supercomputing systems for US government customers on AWS.
However, these investments typically take years to generate returns. AI infrastructure projects often involve long build cycles, delayed revenue recognition and upfront capital commitments, creating a lag between spending and returns.
This dynamic has become a growing concern across the sector, particularly as interest rates remain elevated and debt financing becomes more expensive.
Going forward, investors are likely to focus on Oracle’s ability to bring new data centre capacity online on schedule, convert backlog into revenue, and stabilise cash flows as spending peaks.
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