AI Debt Scrutiny
Oracle's stock plummets 19% as AI investment raises debt concerns despite bullish outlook
Anonymous
Key Points
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The 19% weekly drop is the steepest weekly decline since the 2001 dot-com bust, with CNBC noting Oracle slid around 19% over five trading days and fell at least 2.6% in every session of the week.
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Oracle plans to fund its AI data-center expansion and GPU infrastructure by raising record debt to support OpenAI partnerships and related AI infrastructure commitments.
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Analyst sentiment remains broadly bullish despite the pullback, with 71% of analysts rating the stock as a buy—the highest buy-rating level in about 15 years according to FactSet.
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Oracle is cutting costs, including a 13% reduction in headcount to about 141,000 in fiscal 2026, alongside leadership changes with Hilary Maxson taking on the CFO role.
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Insider activity has included $2.6 million in sales over the last three months, signaling possible caution from insiders amid the stock’s downturn.
Oracle's stock fell 19% in a single week, its worst weekly drop since the dot-com crash of August 2001, according to CNBC. The selloff erased roughly $80 billion in market value, leaving shares at $148.53 by Friday's close.
Investors are alarmed by a simple math problem: Oracle spent $55.7 billion on data centers in fiscal 2026 — a 162% jump — while generating negative free cash flow of $23.7 billion, per GuruFocus. The company now carries $130 billion in total debt, up from $92.6 billion just one year ago.
Five Days of Losses Tied to AI Debt Fears
The slide was steady and relentless. Shares fell at least 2.6% every single day of the week, according to CNBC. Monday's 3.97% drop came after Oracle revealed it had cut 21,000 jobs — 13% of its workforce — over the past year. By Tuesday, reports emerged that the company's severance bill hit $1.84 billion, five times the prior year's amount, per Firstpost.
Wednesday brought more pain. Analysts at Bank of America flagged that over 50% of Oracle's $638 billion order backlog comes from a single customer: OpenAI. Thursday's slide followed news that Oracle plans to raise another $40 billion in fiscal 2027, including a $20 billion common stock sale that could dilute existing shareholders.
The Stargate Bet: Landlord to the AI Industry
Oracle's pain stems from a deliberate strategy. Chairman Larry Ellison has called securing GPU capacity a "once-in-a-generation" land grab. Oracle, OpenAI, and SoftBank are building up to 30 gigawatts of AI computing power under a project called "Stargate." The two companies have committed to a $300 billion, five-year contract, according to research from the MLQ analysis team.
New CFO Hilary Maxson, hired from Schneider Electric in April 2026, confirmed on the earnings call that capital spending hit $55.7 billion — overshooting the company's own $50 billion guidance. She said 2027 spending will reach roughly $70 billion. Oracle is even building its own power plants in Texas, New Mexico, and Wisconsin to keep the lights on at its data centers.
71% of Analysts Still Bullish Despite the Crash
Here is the strange part: Wall Street still likes the stock. According to FactSet data cited by Intellectia AI, 71% of analysts — 36 out of 45 — rate Oracle a "Buy" or "Outperform." That is the highest buy-rating share in roughly 15 years. Bulls point to 93% growth in Cloud Infrastructure and argue that once the data centers are built, high-margin revenue will follow. GuruFocus estimates the stock is 18.7% undervalued, with an intrinsic value of $182.64 per share.
Bears see it differently. They worry Oracle has become a "cash-burning machine" that now behaves more like a utility than a software company — but carries tech-level risk. The biggest fear: OpenAI accounts for more than one-third of Oracle's projected revenue by 2029, per Bank of America. If OpenAI's own funding dries up, Oracle has what analysts call a "single point of failure" baked into its books.
Layoffs, Insider Sales, and Questions About What Comes Next
Oracle admitted in legal filings that AI adoption "resulted in reductions to our workforce," according to The Motley Fool. The 21,000 layoffs happened while the company paid its new CFO a $29.7 million compensation package — a contrast that drew sharp criticism on social platforms. Insiders have sold $2.6 million in stock over the past three months, per GuruFocus, a sign that some close to the company are cautious.
The core challenge is converting a massive backlog into real cash — fast. Oracle's $638 billion in signed contracts sounds impressive, but only 12% is expected to become recognized revenue in the next 12 months, per 24/7 Wall St.. The company must collect that revenue quickly enough to cover interest payments on $130 billion in debt. That race against the clock is what investors are now pricing in.
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