Oracle stock (NYSE: ORCL) extended its decline for a fifth consecutive trading session on Tuesday, as investors have been weighing renewed concerns about the artificial-intelligence spending cycle, higher borrowing costs and the cloud company’s close ties to OpenAI.
Shares fell 3.1% on Tuesday, taking their five-session decline to more than 14%.
The latest weakness came even as chip stocks rebounded from Monday’s sharp selloff, highlighting the pressure facing Oracle as investors reassess companies most directly exposed to the financing and infrastructure demands of the AI boom.
Oracle’s shares have increasingly moved in step with developments surrounding OpenAI, which has emerged as a major customer and driver of the company’s ambitious cloud expansion plans.
OpenAI concerns weigh on Oracle
Shares of companies supplying products and services to OpenAI broadly declined on Monday after executives at prominent AI companies called for more responsible development of increasingly powerful models.
The concerns have since spread beyond the immediate outlook for AI technology to the amount companies may ultimately spend on the infrastructure needed to train and deploy those systems.
Patrick Walravens, head of technology research at Citizens, told MarketWatch that some investors are worried that recent discussions about “pacing the frontier” of AI development – referring to a recent call by Anthropic CEO Dario Amodei to slow down AI development – could lead to more measured spending by frontier labs including OpenAI and Anthropic.
He also noted that investors may be concerned about possible government regulation of AI, which could also slow spending.
Oracle is particularly exposed because it has taken on debt to finance a major expansion of cloud capacity intended to support OpenAI’s growth ambitions.
DA Davidson analyst Gil Luria described the company as occupying an unusual position in the cloud market.
Oracle has the “backlog” of a hyperscaler, or a large cloud provider, but the risk profile of a neocloud, or a new-age cloud company purpose-built for AI computing needs.
At the end of the August quarter, Oracle reported total remaining performance obligations, a proxy for backlog, of $664 billion.
FactSet also shows the company with $88 billion of net debt.
“If AI slows down, at some point that could reduce the demand for AI compute and the most impacted would be neoclouds, especially ones with leverage,” Luria said in the MarkteWatch report, referring to AI computing power.
Rising yields add to financing pressure
Oracle’s AI spending plans are also coming under scrutiny as US borrowing costs rise.
The benchmark 10-year US Treasury yield climbed to its highest level since 2007 on Tuesday, while investors increasingly expect the Federal Reserve to hike interest rates.
Higher yields matter particularly for technology companies because a substantial portion of their valuations is based on earnings and cash flows expected several years into the future.
Rising rates can reduce the present value of those future cash flows while making debt-funded infrastructure projects more expensive.
The pressure is especially relevant for Oracle, which has committed to significant investment in AI-related infrastructure.
The company has said it will raise $40 billion through debt and equity financing in its current fiscal year, including the $20 billion stock sale it completed in the first quarter.
Oracle reported negative free cash flow of $5.40 billion on Thursday, although that was better than analysts’ average estimate of a cash burn of $9.56 billion, according to data compiled by LSEG.
The company’s increasing debt burden has contributed to pressure on its shares this year, with the stock down close to 30%.
Layoffs add fresh concern
The company also began notifying employees about a fresh round of layoffs, while social media buzzed with posts from workers claiming to have received termination emails.
“After careful consideration of Oracle’s current business needs,” the company reportedly told affected employees in an email, adding that the redundancies were part of a “broader organizational change.”
The notices said Monday was the employees’ last working day.
Strong results had briefly eased investor concerns
The latest decline follows a sharp post-earnings rally in Oracle shares after stronger-than-expected quarterly results and an upbeat outlook helped ease concerns surrounding its debt-funded AI expansion.
JP Morgan analysts led by Samik Chatterjee said the results addressed several investor concerns, including the sustainability of backlog growth, its conversion into revenue amid data-center delays and the possibility of further capital raises.
“We got both better in-period execution and future-period bookings than anticipated. Check and check,” analysts led by Jackson Ader at KeyBanc Capital Markets said.
Those results provided investors with evidence that Oracle’s huge backlog can translate into future revenue, but the recent market weakness suggests that financing requirements and the pace of AI development remain central to the stock’s outlook.
Analysts remain positive on Oracle’s outlook: should you buy?
Despite the recent selloff, several analysts have maintained positive views following Oracle’s earnings report, and there has been no re-rating by analysts following concerns about an AI development slowdown.
According to Stocktwits, 35 of 43 analysts rate the stock Buy or higher.
The consensus price target is near $239, representing a 70% upside from current levels.
Citi reiterated its Buy rating, saying Oracle had “cleared the runway” for its upcoming Investor Day.
“Oracle delivered a solid fiscal first quarter that checked nearly every box and reinforces the bull case heading into Investor Day,” the analysts said.
Citi described Oracle’s fiscal 2027 outlook as “modest” and management’s framework as “conservative”, arguing that the scale of the first-quarter outperformance could leave room for upward revisions.
“Given the magnitude of fiscal first-quarter outperformance, we see a favorable setup for upward revisions at Investor Day and AI World,” the analysts added.
Barclays also raised its price target to $252 from $250 while maintaining an Overweight rating.
The firm said investors could be ready to reassess Oracle following the earnings report as growth momentum improves and financing uncertainty eases.
“The company’s growth inflected and should continue to accelerate from here,” Barclays said in a research note cited by TheFly.
Barclays also highlighted Oracle’s completion of its $20 billion at-the-market equity offering, which it said reduced uncertainty over how the company will fund its expansion.
Scotiabank maintained its Outperform rating, while Citizens analyst Patrick Walravens reiterated a Market Outperform rating and a $285 price target.
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