Two months ago, Oracle (ORCL.US) saw its stock surge 36% in its best single-day performance since 1992, driven by cloud infrastructure revenue guidance that far exceeded investor expectations. However, the rally proved short-lived, as the company’s market capitalization has since dropped by a third, erasing all prior gains. By mid-November, its shares were on track for their worst monthly performance since 2011.
Initially, market enthusiasm was fueled by Oracle’s deepening partnership with OpenAI. But sentiment has shifted, with many now questioning whether the AI market has grown too fast, whether a bubble exists, and whether OpenAI can deliver on its pledge to invest $300 billion in Oracle over five years.
“The AI hype is fading,” said KeyBanc Capital Markets analyst Jackson Ader, noting that Oracle has the lowest free cash flow projections among major cloud providers involved in GPU operations. To fund its capital-intensive expansion, Ader suggested Oracle may turn to more innovative financing tools.
According to insiders, Oracle plans to raise $38 billion through debt issuance to support its AI ambitions. The company is collaborating with partners to develop and lease data centers in Texas, New Mexico, and Wisconsin while procuring hundreds of thousands of GPUs from Nvidia (NVDA.US) and AMD (AMD.US) to power AI models—a venture requiring massive funding.
At Oracle’s “AI World” conference in October, its highly scalable cloud infrastructure design drew praise from tech enthusiasts. Investors initially remained optimistic, partly due to Oracle’s $450 billion backlog of signed but unrecognized revenue contracts. Yet skepticism soon emerged. On October 17, shares fell 7% as doubts grew over the feasibility of its ambitious targets, including growing cloud infrastructure revenue from $18 billion in fiscal 2026 to $166 billion by fiscal 2030.
Barclays analyst Andrew Keches highlighted off-balance-sheet debt instruments and supplier financing as potential options for Oracle, though he recently downgraded the company’s debt rating, citing “substantial funding needs.” “We struggle to see a path for Oracle’s credit rating improvement,” Keches wrote in a client note.
Bullish investors still point to founder Larry Ellison’s track record. One anonymous hedge fund manager called Ellison “the last person you’d want to bet against.” RBC Capital Markets analyst Rishi Jaluria suggested Oracle could reignite momentum with more AI deals, though he maintains a “hold” rating.
Meanwhile, Oracle’s five-year credit default swaps (CDS)—a form of debt insurance—have climbed to a two-year high, reflecting growing investor caution. Barclays has advised clients to buy Oracle’s CDS.
When questioned about OpenAI’s ability to pay Oracle $60 billion annually, co-CEO Clay Magouyrk responded confidently, citing OpenAI’s rapid growth. OpenAI CEO Sam Altman later claimed the company’s annualized revenue would surpass $20 billion this year and reach “hundreds of billions” by 2030.
However, D.A. Davidson analyst Gil Luria criticized Oracle’s AI strategy as “irresponsible investing” reliant on speculative demand. He contrasted Oracle with cash-rich Microsoft (MSFT.US), Amazon (AMZN.US), and Google (GOOGL.US), calling Oracle’s new AI contracts a “low-margin, bad business” despite its core 80% gross margins. Luria, who also rates the stock “hold,” noted that the post-earnings surge has now fully reversed—a “logical” outcome, in his view.
Oracle has not responded to requests for comment.