Major stock market indices fell by more than half a percent following the publication of a report by The Information. Shares of AI cloud providers such as Oracle, Nebius, and CoreWeave dropped by 3% to 5%. Nvidia shares, which had previously risen by 2%, ended in the red. The decline came after problems faced by Oracle in generating profits from renting servers equipped with Nvidia chips were revealed. The report showed that Oracle's internal documents revealed an average gross profit margin of 16% over the past year from renting Nvidia chips to AI developers such as OpenAI. This figure was lower than analysts had estimated and even lower than that of many companies outside the tech sector.
Details from Oracle's Internal Documents
Oracle's internal data showed that the company is losing significant amounts of money on Nvidia's latest hardware. This situation highlights the lag between when new chips become operational and when customers begin using them on a large scale. For example, in the fiscal quarter ending in August 2025, Oracle's AI cloud division generated $900 million (approximately CZK 20.7 billion) in revenue from renting servers equipped with Nvidia chips, but gross profit amounted to only $125 million (about CZK 2.875 billion). This represents a gross profit margin of just 14%, significantly less than the 70% achieved by the company's traditional software business.
Reasons for Low Margins
The high cost of Nvidia chips and Oracle's aggressive pricing strategy, which the company uses to gain market share in the competitive AI infrastructure market, are driving these low margins. The company is accepting short-term pressure on profits to secure its long-term position. Analysts have expressed concerns because Oracle is not as strongly positioned as giants such as Google or Amazon, which are better able to handle similar financial pressures thanks to their balance sheets. Oracle has also taken on substantial debt to build data centers and provide chips for rent, setting it apart from other major players.
The disclosure wiped more than $40 (about CZK 920) off Oracle's share price from its peak in September 2025, reducing the company's market capitalization by billions. The report also affected related companies in the AI infrastructure ecosystem, such as Nebius, whose shares fell similarly. Investors are concerned about whether Oracle's AI cloud expansion will deliver sustainable profits and meet expectations. This development comes at a time when Oracle is signing major contracts, but the profits from them remain weak due to costs and delays in adoption.
Source: theinformation.com
