Oracle slides as hefty AI spending, debt plans spook investors

Oracle’s stock fell 7.2% to $186.70 in premarket trading after the company revealed plans for up to $95 billion in capital expenditures by fiscal 2027. The spending, aimed at AI-driven data center expansion, has spooked investors, particularly due to Oracle’s reliance on debt and equity financing to fund the growth. The company expects to raise nearly $40 billion in 2027, following $55.66 billion spent in fiscal 2026, exceeding its initial $50 billion target announced in February. Analysts highlight Oracle’s financial constraints, noting it lacks the cash reserves of hyperscalers like Amazon and Microsoft. Russ Mould of AJ Bell warned that Oracle’s need to secure funding externally makes it vulnerable to market conditions, while J.P. Morgan acknowledges the trade-off as necessary for long-term revenue growth. However, risks remain, including scaling data centers, sustaining cloud bookings, and managing rising debt. The broader IT sector in Europe also faced pressure, with SAP and Capgemini declining 4.4% and 3.6%, respectively, following a downgrade by UBS. Oracle’s stock trades at 24.56 times forward earnings, higher than Microsoft’s 20.47 but close to Amazon’s 25.19, reflecting investor expectations for AI-driven growth. Morgan Stanley projects AI-related global debt issuance will exceed $570 billion in 2026, with hyperscaler spending surpassing $1 trillion by 2027. Amazon recently secured a $17.5 billion loan to fund its infrastructure expansion, underscoring the industry-wide push for AI investments. Oracle’s aggressive spending strategy aims to compete with rivals but has raised questions about its ability to sustain growth amid financial strain.