Oracle shares fall for fifth straight day amid concerns over AI spending
Oracle shares fell 3.1% on September 15, extending their decline for a fifth consecutive trading session. Over five sessions, the company’s shares lost 13.6%, although shares of chipmakers linked to OpenAI partially recovered on Tuesday, MarketWatch reports.
Oracle’s connection with OpenAI
Oracle is closely tied to OpenAI’s prospects: the company has raised debt financing to rapidly expand cloud capacity intended to support the ChatGPT developer’s growth ambitions. Recently, there has been a lot of news surrounding OpenAI, including its plans and the pace of development of advanced artificial intelligence models.
OpenAI CEO Sam Altman told Fortune that the company does not plan an initial public offering this year given the safety context. Patrick Walravens, head of technology research at Citizens, told MarketWatch that investors are concerned about the possibility of more restrained funding from leading labs, including OpenAI and Anthropic.
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Debt and cloud contracts
According to Walravens, the risk of government regulation of artificial intelligence, which could slow spending in this area, may also be prompting investor caution. D.A. Davidson analyst Gil Luria noted that Oracle has an order book typical of a large cloud provider, but at the same time the risk profile of a new cloud company built for AI computing needs.
At the end of the August quarter, Oracle reported $664 billion in total remaining performance obligations for future contract fulfillment, a metric used as an approximate indicator of its order book. According to FactSet, the company’s net debt stood at $88 billion.
Luria believes that a slowdown in AI development could reduce demand for computing capacity. In his view, this could affect new cloud companies the most, especially those carrying debt. CoreWeave shares also fell for a fifth consecutive session and lost 18.9% over that period, while Nebius Group shares declined by 15% during their own five-day losing streak.
