Oracle stock has worst week since 2001 dot-com bust as AI financing concerns escalate

Oracle Corporation has experienced its most challenging week on Wall Street in 25 years, with the stock plunging by 19%. This decline marks the steepest drop since the infamous dot-com bust in 2001, raising significant concerns about the company’s substantial debt and its ambitious investments in artificial intelligence. Over the past week, Oracle's shares fell at least 2.6% each day, contributing to a staggering 55% decrease in value since reaching a market cap high of $900 billion last September. This downturn is largely attributed to the financial strain of fulfilling commitments to AI infrastructure, particularly with OpenAI, alongside a growing debt burden. As of the end of May, Oracle held around $130 billion in debt, while capital expenditures surged by 162% to nearly $56 billion for the fiscal year 2026. Despite the challenges, Oracle is aggressively expanding its data center capabilities to compete with giants like Amazon, Microsoft, and Google. However, unlike its rivals, Oracle is unable to offer a complete technology stack, which poses additional risks. The company's latest fiscal reports revealed a negative free cash flow of nearly $24 billion, prompting plans to raise $40 billion through debt and equity financing in fiscal 2027, including a recently announced $20 billion share sale. Analysts from Evercore remain optimistic about Oracle’s long-term prospects, suggesting that financing and leverage will dominate investor discussions in the near future, even as demand for AI solutions remains strong. In fact, 71% of analysts currently recommend purchasing Oracle stock, the highest level of bullish sentiment seen in 15 years. However, the company is not without its obstacles. The ongoing selloff in the software sector, driven by fears that AI may replace many traditional software products, has contributed to Oracle's struggles. The iShares Expanded Tech-Software Sector ETF has seen a 16% decline in 2026, while Oracle's stock has dropped by 24% during the same period. In its recent annual report, Oracle revealed a 13% reduction in workforce, bringing the total number of employees down to 141,000, with noticeable cutbacks in sales and marketing. Co-founder Larry Ellison’s absence from the recent earnings call left dual CEOs Clay Magouyrk and Mike Sicilia, along with newly appointed finance chief Hilary Maxson, to address investor queries. Ellison’s declining fortune has also been highlighted, as he has been surpassed in the rankings of the world’s wealthiest individuals by notable figures such as Larry Page and Sergey Brin of Google, Jeff Bezos of Amazon, and Michael Dell, although he still retains a net worth exceeding $200 billion. Looking ahead, Oracle is committed to its expansion plans, targeting new data centers in Michigan, New Mexico, and Texas by 2027. Finance chief Maxson emphasized the importance of disciplined capital allocation and maintaining a robust balance sheet to uphold the company’s investment-grade credit rating.