Oracle Shares Halved From 2025 Peak as AI Trade Loses Its Shine
Oracle’s shares have fallen more than 50% from its 2025 high, wiping out hundreds of billions of dollars in market value as investor enthusiasm around AI gives way to tougher questions about spending, financing, and returns. The reversal marks one of the biggest shifts in sentiment among large-cap tech names that had been viewed as core infrastructure plays in the AI buildout.
What was once seen as a near-perfect positioning in cloud and AI infrastructure is now being re-evaluated through a more skeptical lens. Investors are no longer rewarding exposure to AI on promise alone; they want clearer visibility into profitability, cash flow timing, and balance-sheet risk.
From AI Darling to Capital Spending Concern
Oracle’s surge last year was fueled by expectations that its cloud business would become a major beneficiary of AI-driven demand for computing power and data center capacity. Optimistic guidance surrounding cloud growth helped propel the company’s valuation to within reach of the trillion-dollar mark at its peak.
That narrative has cooled as attention shifts to the scale of investment required to support AI workloads. Like several tech peers, Oracle has been ramping up spending on data centers and infrastructure, raising concerns that near-term margins could be squeezed before revenue fully catches up. Analysts cited by Reuters note that the market is increasingly sensitive to the gap between capital outlays today and monetization tomorrow.
OpenAI Links and Financing Questions
Another layer of unease surrounds Oracle’s exposure to deals tied to OpenAI and the broader AI ecosystem. Investor questions about the circular nature of funding flows in parts of the AI landscape, where private AI firms, infrastructure providers, and financing partners are deeply interconnected.
At the same time, Oracle and affiliated projects have raised significant debt to help fund data center expansion. That has brought fresh scrutiny to leverage and credit risk, particularly in an environment where borrowing costs remain elevated compared with the ultra-low-rate era that fueled earlier tech expansions. The focus has shifted from growth at any cost to the sustainability of that growth model.
Software Sector Pressure Adds to the Slide
Oracle’s decline has also been amplified by broader weakness across software stocks. Investors have grown more cautious about traditional enterprise software providers as generative AI tools evolve rapidly, raising questions about how existing platforms will adapt and defend pricing power. Recent AI product launches from emerging players have reinforced the perception that disruption risks are rising. That backdrop has led to valuation compression across the sector, making it harder for even established names to sustain premium multiples.
Sentiment Shift
The tone around Oracle increasingly reflects a “prove it” mindset on Wall Street. Where investors once extrapolated aggressive AI-driven growth scenarios, they are now demanding evidence that massive infrastructure spending will translate into durable earnings expansion. Strategists say this shift doesn’t necessarily mean the AI opportunity is fading — but it does mean the market is recalibrating timelines and risk. Stocks that ran far ahead of fundamentals during the AI euphoria are now more vulnerable to sharp pullbacks when expectations reset.
Looking Ahead
Oracle’s path forward will likely depend on its ability to demonstrate that AI-related investments are driving tangible cloud revenue growth without unduly straining margins or the balance sheet. Future earnings reports will be key in showing whether demand is materializing at the scale and speed previously assumed. More broadly, Oracle’s pullback may serve as a bellwether for the next phase of the AI trade — one defined less by excitement and more by execution. Investors appear willing to stay engaged, but only if companies can clearly connect AI spending today with sustainable profits tomorrow.
