Oracle hit hard in Wall Street’s tech sell-off over its huge AI bet

In a dramatic turn of events, Oracle has experienced a steep decline in its stock value, outpacing many of its Big Tech counterparts during a recent sell-off in the tech sector. This downturn comes as the company aggressively invests in artificial intelligence, raising concerns among investors on Wall Street. Founded by Larry Ellison, Oracle is making significant strides in the AI landscape, pledging to invest hundreds of billions in the upcoming years to enhance its chip production and data center capabilities. A substantial portion of this investment is tied to agreements aimed at providing computing resources to OpenAI, the creator of ChatGPT. However, the scale and urgency of Oracle's AI initiatives have left some investors anxious, particularly as the focus intensifies on capital expenditures among major tech firms. Over the past month, Oracle's shares have plummeted by 25%, a decline nearly double that of Meta, the next most affected tech giant. This drop has erased more than $250 billion from its market capitalization, a stark contrast to the gains it recorded following its partnership announcements with OpenAI last September. Additionally, an index from the Financial Times monitoring Oracle's debt has seen a decline of approximately 6% since mid-September, positioning it worse than its primary competitors. Concerns are heightened for Oracle due to its late transition from traditional business software to cloud computing, and its current focus on AI, which heavily relies on the success of OpenAI. Alex Haissl from Rothschild & Co Redburn articulated these concerns, stating, "This represents a fundamentally different business model than what investors typically value in cloud services. While the revenue potential appears impressive, the capital demands are substantial, leading to minimal value creation." Investors are increasingly wary of the high valuations and significant capital expenditures being undertaken by a select few tech giants. There are fears that if certain unprofitable AI startups, including OpenAI and Anthropic, fail to meet their ambitious promises, the repercussions could be severe across the industry.