Shares of Oracle extended their downturn in pre-market trading on Friday, falling by a further 1.2% following Thursday’s steep 11% drop. The selloff triggered a broader retreat among technology stocks as Oracle’s surging capital expenditures and subdued guidance deepened uncertainty over the timing of returns from its bold artificial intelligence ambitions.
Oracle, a critical cloud services partner for OpenAI, issued a lackluster outlook this week, fueling doubts about when, or if, sizable AI-driven productivity gains might materialize—a technology many executives tout as the next frontier, but which has so far delivered uneven results. Since peaking in September, Oracle’s share price has plummeted nearly 40%, erasing more than $360 billion in market value. Thursday alone accounted for roughly $67 billion in lost market capitalization, after the firm’s second-quarter results left unresolved a central worry among investors: excessive dependence on OpenAI.
Oracle’s first-quarter guidance, supercharged by AI growth prospects, had previously propelled its shares to a record high on September 10, briefly making founder Larry Ellison the world’s wealthiest individual. However, sharp year-on-year growth in data center spending—measured by capital expenditure at $12 billion last quarter, up from $8.5 billion and far ahead of the $8.25 billion analysts projected—intensified anxiety over escalating costs. Company executives announced Wednesday that total capital expenditures are now expected to reach approximately $50 billion by the end of fiscal 2026, reflecting a $15 billion increase from September’s forecast, according to the company’s post-results conference call.
The company’s credit default swaps, a measure of debt risk, climbed nearly 12 basis points on Thursday to their highest level in at least five years. Oracle currently holds around $100 billion in outstanding debt.
Elsewhere in tech, Broadcom also came under pressure, with shares losing 5% in pre-market trading on Friday. This reaction followed the company’s projection of first-quarter revenues above Wall Street forecasts but included a warning that profit margins would narrow as higher AI-related revenues alter the business mix.
Broadcom’s fourth-quarter revenue rose 28% year-on-year to $18.02 billion, exceeding consensus estimates, while adjusted EPS reached $1.95. Adjusted EBITDA stood at $12.22 billion, accounting for 68% of revenue. Guidance for the first quarter of next year calls for around $19.1 billion in sales, up 28% annually and above analysts’ expectations, with adjusted EBITDA forecast at 67% of projected revenue.
However, investor sentiment soured over three main concerns: reassurance over the quality of Broadcom’s order backlog weakened as management characterized the OpenAI partnership as a “multiyear journey” rather than a binding long-term commitment; expectations for significant XPU revenue were pushed out to 2027–2029, elevating risk and discounting near-term benefits; and the company revealed that its $72 billion backlog comes with lead times as long as 18 months, indicating capacity constraints and limiting the firm’s ability to capitalize on surging demand.
