{"id":463296,"date":"2025-12-22T00:55:20","date_gmt":"2025-12-22T00:55:20","guid":{"rendered":"https:\/\/www.europesays.com\/us\/463296\/"},"modified":"2025-12-22T00:55:20","modified_gmt":"2025-12-22T00:55:20","slug":"how-oracle-became-a-poster-child-for-ai-bubble-fears","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/463296\/","title":{"rendered":"How Oracle became a \u2018poster child\u2019 for AI bubble fears"},"content":{"rendered":"\n

Oracle (ORCL<\/a>) stock\u2019s boom and bust in 2025 has become emblematic of the tech trade\u2019s central conflict: Investors can\u2019t decide whether AI is a generational opportunity or a looming risk.<\/p>\n

Oracle started the year on a high note by announcing a joint venture with ChatGPT developer OpenAI (OPAI.PVT<\/a>) and SoftBank called Stargate, in which the companies committed to investing $500 billion in US AI infrastructure. President Trump announced the news in the Oval Office in January, flanked by the respective companies\u2019 leaders, including Oracle chair Larry Ellison \u2014 a move that sent the stock soaring<\/a>.<\/p>\n

AI optimism continued to push Oracle shares higher following its quarterly earnings reports in June<\/a> and September<\/a>, with AI-driven deals<\/a> set to push cloud segment revenue to $166 billion in 2030. The stock\u2019s surge in September briefly made Ellison the world\u2019s wealthiest person<\/a>.<\/p>\n

But AI euphoria quickly gave way to doubt. Investors became increasingly concerned over the rising use of debt to fund tech firms\u2019 AI spending, just as the payoff of that spending remains hotly debated. Those concerns are evidenced in the budding demand for Big Tech credit default swaps (CDS) \u2014 financial contracts that act as insurance by letting investors bet on the likelihood that a company will default on its debt.<\/p>\n

Read more: How to protect your portfolio from an AI bubble<\/a><\/p>\n

Shares in Oracle have dropped more than 40% from their September peak but are up 16% for the year.<\/p>\n

\u201cAs these firms such as Oracle have issued more debt, they’ve become more leveraged, which from a credit perspective means they’re riskier,\u201d S&P Global Market Intelligence analyst Gavan Nolan said, noting that CDSs have begun trading for the first time for even the “Magnificent Seven” tech firms with the highest credit ratings, like Microsoft (MSFT<\/a>) and Alphabet (GOOG<\/a>, GOOGL<\/a>), in recent weeks.<\/p>\n

Oracle has been at the center of the debt fears. The company issued nearly $26 billion in bonds this year, per Bloomberg data. Its CDS spreads have widened significantly, with the cost of insuring the company\u2019s debt against default for five years hitting its highest since 2009<\/a> this month.<\/p>\n

\u201c Oracle has become the poster child for fears of an AI bubble,\u201d Oracle investor and tech analyst Cory Johnson told Yahoo Finance.<\/p>\n

Oracle declined to comment for this story.<\/p>\n

In its latest earnings results, the tech firm\u2019s total debt rose 40% from the previous year to $124 billion, just as its cash outflow climbed from $2.7 billion to $10 billion. Analysts noted that after Oracle\u2019s results, the company quietly disclosed in an SEC filing that it has $248 billion in additional lease commitments set to begin between the third quarter of its 2026 fiscal year and 2028 \u2014 mostly for data centers \u2014 not reflected in its balance sheet.<\/p>\n

Story Continues <\/p>\n

Morningstar analyst Luke Yang told Yahoo Finance that the dynamic means Oracle has \u201cvery little room for error\u201d to execute its strategy.<\/p>\n

\"Oracle Oracle stock\u2019s boom and bust in 2025 has become emblematic of the tech trade\u2019s central conflict: investors can\u2019t decide whether AI is a generational opportunity or a looming risk. REUTERS\/Dado Ruvic\/Illustration\/File Photo \u00b7 Reuters \/ Reuters <\/p>\n

\u201cOracle’s free cash flow is more constrained compared to other hyperscalers,\u201d he said. Hyperscalers refer to Big Tech firms like Microsoft and Alphabet that operate massive data centers for their cloud businesses. \u201cOn the debt front \u2014 or other financing methods \u2014 there are only so much resources you can tap into.\u201d<\/p>\n

Soon enough, he said, Oracle will have to generate cash from its data centers \u2014 but how soon and how well it can do that is unclear, partly because firms set to rent computing capacity from Oracle are still figuring out how to monetize AI.<\/p>\n

Complicating matters for Oracle is its deal with OpenAI \u2014 a pain point for the stock. The ChatGPT developer accounts for the majority \u2014 at least $300 billion<\/a> \u2014 of Oracle\u2019s remaining performance obligations, a measure of future revenue from customer contracts \u2014 a detail that, once revealed, sent Oracle shares tumbling from their September peak as Wall Street questioned whether OpenAI can meet its ambitious revenue targets amid mounting competition from Google.<\/p>\n

OpenAI\u2019s costs are also set to hit $1.4 trillion<\/a> over the next eight years due to AI infrastructure deals with firms including Nvidia (NVDA<\/a>), CoreWeave (CRWV<\/a>), AMD (AMD<\/a>), and Broadcom (AVGO<\/a>), in addition to Oracle. The commitments <\/a>have made investors particularly wary.<\/p>\n

Investors have also been skeptical that AI demand will be as high as tech firms project.<\/p>\n

\u201cThere’s a lot of concern whether or not [demand] comes through in the same way or in the same size that’s commensurate with what Oracle actually has to invest in now to generate a meaningful return on it,\u201d Hedgeye Risk Management analyst Andrew Freedman said.<\/p>\n

Oracle has said it could quickly repurpose its AI infrastructure for other customers if a client can\u2019t pay its bills.<\/p>\n

There is also concern that Oracle\u2019s data center projects could face delays, potentially adding to the time horizon by which the company sees an AI payoff. Bloomberg reported<\/a> that Oracle pushed back completion dates for data centers tied to its contracts with OpenAI to 2028 from 2027, but the company denied any delays. And a report<\/a> from the Financial Times this month said that Oracle’s biggest partner on data centers, Blue Owl (OWL<\/a>), would not back its massive Michigan facility. Oracle said that a different equity partner other than Blue Owl was selected to finance the project.<\/p>\n

The wave of investor skepticism has hit the company just as it’s undergoing a CEO shake-up \u2014 co-CEOs Clay Magouyrk and Mike Sicilia in late September replaced longtime chief executive Safra Catz, who transitioned to Oracle’s board of directors.<\/p>\n

Oracle investor Johnson, like many who still remain bullish on the company’s stock, believes in its management: \u201c Oracle has historically delivered on their promises,\u201d he said. \u201c Every year and every decade, Oracle ends up ahead, and their competitors fall behind.\u201d<\/p>\n

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.<\/p>\n

Click here for the latest technology news that will impact the stock market<\/strong><\/a><\/p>\n

Read the latest financial and business news from Yahoo Finance<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Oracle (ORCL) stock\u2019s boom and bust in 2025 has become emblematic of the tech trade\u2019s central conflict: Investors…\n","protected":false},"author":3,"featured_media":463297,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[691,738,211159,211160,198712,8296,92329,211158,1807,158,67,132,68],"class_list":{"0":"post-463296","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-central-conflict","11":"tag-cory-johnson","12":"tag-credit-default-swaps","13":"tag-data-centers","14":"tag-larry-ellison","15":"tag-oracle-stock","16":"tag-president-trump","17":"tag-technology","18":"tag-united-states","19":"tag-unitedstates","20":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115760498156637409","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/463296","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=463296"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/463296\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/463297"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=463296"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=463296"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=463296"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}