Oracle Shares Plunge Amid Investor Concerns Over AI Infrastructure Spending
Less than a year ago, Oracle was hailed for its remarkable transformation from a traditional software giant struggling against cloud competitors to a key player in the global race to build artificial intelligence infrastructure. Collaborations with OpenAI, participation in massive computing projects, and soaring demand for its cloud services propelled Oracle's stock and market value close to $1 trillion. At its peak in September 2025, founder Larry Ellison briefly became the world's richest person with an estimated net worth of $393 billion.
However, the situation reversed sharply. In the past week alone, Oracle's stock dropped about 19%, marking its steepest weekly decline since 2001. The company is now valued at $427 billion, roughly 55% below its nine-month peak, and Ellison's net worth has fallen to approximately $191 billion, placing him sixth among billionaires. This decline is paradoxical because Oracle continues to report unprecedented demand for AI infrastructure, rapid cloud growth, and record order backlogs.
The core investor concern centers on how Oracle will finance its aggressive expansion without jeopardizing its financial stability. The company disclosed capital expenditures of $55.7 billion for fiscal 2026, with plans for even higher investments in 2027 and 2028. Oracle intends to raise about $40 billion through debt and equity to fund cloud infrastructure growth. Its liabilities have ballooned to around $130 billion, with future lease commitments for new server farms totaling approximately $260 billion. Free cash flow turned negative by $24 billion in the fourth quarter, indicating current spending on AI infrastructure exceeds cash generated from operations.
Oracle has also cut about 21,000 employees (13% of its workforce), mainly in research and development and sales, to align costs with its AI investment focus. CEO Safra Catz acknowledged the financial challenges during recent investor calls, while Larry Ellison notably did not participate. Analysts remain largely optimistic, with firms like Cantor and Jefferies maintaining buy ratings and price targets more than double the current stock price. They highlight that $75 billion of Oracle’s order backlog involves contracts with upfront payments or customer co-financing, which reduces capital needs and provides a competitive edge.
Despite investor jitters over financial leverage and funding pace, most analysts believe Oracle’s long-term AI growth story remains intact. The disconnect between cautious investors and bullish analysts underscores the tension between the promise of AI-driven expansion and the high costs required to realize it.
