By Martin Baccardax

Oracle stock has given back all the gains from the cloud computing group's " Nvidia Moment" as investors grow increasingly cautious over investments linked to the artificial intelligence boom.

When Oracle reported earnings in September, the results included a massive revenue forecast. That forecast, however, has become a source of consternation due to the source of that revenue -- OpenAI, the privately held group backed by Microsoft and run by Sam Altman, which plans to spend around $1.4 trillion building and accessing AI data centers over the next decade.

In fact, Oracle is also trading, at least in part, as a proxy for OpenAI which also happens to sit at the epicenter of concerns over massive AI spending commitments that could face serious challenges from a lack of power, financing, and demand over the longer term.

One of its biggest commitments is a reported $300 billion agreement to buy computing power for Oracle, and that deal represented around 65% of its so-called "RPO" forecast that sent the stock soaring in early September.

But a lot has happened since then. Oracle tapped the corporate bond market for an $18 billion debt sale that triggered a wave of new issues from tech giants such as Meta Platforms. Private credit markets wobbled following a spate of auto-related bankruptcies, and broader market liquidity dried up as a result of some of the Federal Reserve's balance sheet management.

Most important, however, investors have started to question both the arithmetic around some of the AI investment themes, and the ability of some companies to boost revenue to match expansion, as well as capacity constraints tied to the energy, water, and labor needed to keep them operating.

Oracle shares have fallen nearly 10% since their pre-earnings close on Sept. 9, and have shed more than $300 million in market value since their closing peak on Sept. 10. Oracle stock was down 4.5% at $216.71 on Thursday, the lowest since July 1.

The selloff is due, in part, to the stock having risen so sharply over the month that followed its update, as news investors both took profits on the meteoric gains and began the early rotation into non-tech names that has helped the Dow Jones Industrial Average outpace both the S&P 500 and the Nasdaq Composite over the past four weeks.

But it also represents the way in which both Oracle and OpenAI have been managing their investor messaging over the past few weeks.

"It's a cautionary tale," said D.A. Davidson analyst Gil Luria during a CNBC interview on Wednesday. "We should definitely take everything they say from now on with a grain of salt, just because of how this all transpired."

Credit market concerns have also weighed on the borrowing costs of certain AI firms, including Oracle, driving the prices of credit default swap contracts to multiyear highs.

Analysts at Barclays, in fact, downgraded Oracle's corporate debt to "underweight" earlier this week and warned the group could lose its investment grade credit status as a result of its weakening balance sheet and negative cash flow.

The larger pressure on Oracle's tradable securities, however, could be due to the fact that OpenAI remains a private company.

Late last month, Microsoft revealed a $4.1 billion hit to its September quarter earnings based on the 32.5% stake it had in the ChatGPT creator. That implied a loss of around $12 billion for OpenAI during the same period and a level that nearly matches the company's projected revenue of $13 billion for the whole of 2025.

It's the kind of thing that would cause some investors to short OpenAI if they could. Oracle appears to be the next-best option.

Short interest in the stock has risen to around 55 million shares, according to data from Ortex, or around 2% of the outstanding float. That's up from around 1.2% at the end of last month.

Still, Luria at D.A. Davidson says there's a lot to like about Oracle, just not with respect to its association with OpenAI.

"Let's forget about the open AI false promises," Luria told CNBC. "Oracle's core business in cloud is growing. They have good customers. They may end up owning a piece of TikTok USA."

"Those are reasons to get excited about Oracle," he added. "But it also makes sense that the $100 of appreciation in Oracle stock has completely gone away."

The question is how much more will disappear before the selling is done.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 13, 2025 15:22 ET (20:22 GMT)

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