Shares of technology giant Oracle are experiencing a dramatic plunge that is exposing the hidden risks of the artificial intelligence boom. Since their September peak, the company's shares have lost 45% of their value and fell 11.1% in January 2026 alone. Investors are concerned about massive spending on AI infrastructure, rising debt, and legal problems that are casting a shadow over the company's ambitious plans.
What is Oracle's role in AI?
Oracle is one of the world's leading providers of enterprise software and cloud services. The company specializes in database systems, cloud infrastructure, and enterprise applications. In recent years, Oracle has been investing aggressively in Oracle Cloud Infrastructure (OCI), which is intended to compete with giants such as Amazon Web Services (AWS) and Microsoft Azure.
In the field of artificial intelligence, Oracle has become a key player through its partnership with OpenAI, the creator of ChatGPT. The company has committed to providing OpenAI with cloud infrastructure worth $300 billion (approximately CZK 6.9 trillion), representing one of the largest contracts in the history of the technology industry. Oracle is building extensive data centers equipped with powerful chips for training and running AI models, which is crucial to the future of artificial intelligence.
Debt trap and negative cash flow
The main reason for the stock's decline is the company's alarming financial situation. In the second quarter of fiscal 2025, Oracle spent $12 billion (CZK 276 billion) on capital expenditures, significantly more than the $8.25 billion (CZK 190 billion) analysts had expected. This led to negative free cash flow of $10 billion (CZK 230 billion) in a single quarter.
The company also raised its capital expenditure forecast for fiscal 2026 by an additional $15 billion (CZK 345 billion). Most of this money is going toward data centers intended for OpenAI. Oracle's total debt now stands at approximately $100 billion (CZK 2.3 trillion), with the company issuing $18 billion (CZK 414 billion) in bonds in September 2025 to finance its cloud expansion.
The bond market's reaction was even more dramatic than that of the stock market. Oracle's bond yields rose sharply, and some newer issues that were originally rated investment grade are now trading like high-yield bonds. The company's credit risk indicator reached its highest level since 2009.
Lawsuit and data center delays
In January 2026, bondholders filed a proposed class-action lawsuit alleging that Oracle failed to fully disclose the extent of the additional debt it would need to finance the construction of AI infrastructure. The lawsuit comes as the company has entered into a multiyear contract with OpenAI and raises questions about the transparency and sustainability of its financial model. This legal threat increases the company's cost of capital and makes the successful construction of the data centers even more critical to the survival of its investment strategy. Investors fear that Oracle may not be able to meet its ambitious targets without taking on additional debt.
In December 2025, Bloomberg revealed that Oracle had postponed the completion of some U.S. data centers for OpenAI from 2027 to 2028 due to labor and material shortages. Although Oracle spokesperson Michael Egbert said there had been no delays at sites needed to fulfill contractual obligations, the report sparked further investor concerns. Data center researcher Jonathan Koomey, who has advised companies including IBM and AMD, explains that the AI boom is running up against the difference between digital and physical speed. "The world of bits moves fast. The world of atoms does not. And data centers are where these two worlds collide," Koomey said.
Lead times for large transformers can be four to five years, while industrial gas turbines can take six to seven years. Even if a company is willing to pay premium prices, the factories producing these components cannot expand production overnight. One of the most ambitious projects is Project Jupiter, a massive data center complex in New Mexico worth more than $160 billion (CZK 3.7 trillion), which is a key part of Oracle's commitment to OpenAI.
Risk of concentration on a single customer
Another significant risk is the extreme dependence on OpenAI. One customer, widely reported to be OpenAI, is responsible for a significant portion of Oracle's $523 billion (CZK 12 trillion) in remaining performance obligations. However, OpenAI's annual revenue is only a fraction of its $60 billion (CZK 1.4 trillion) annual commitment to Oracle, raising concerns about its ability to pay. Rating agencies have flagged the counterparty risk and Oracle's increased leverage resulting from the deal. If OpenAI were to default on its obligations or renegotiate the contract, Oracle would face a massive revenue write-off and costly, underutilized data centers.
How does the competition compare with Oracle?
While all five of the largest AI hyperscalers – Google, Meta, Amazon, Microsoft, and Oracle – have collectively issued approximately $121 billion (CZK 2.8 trillion) in bonds this year to finance data center construction, Oracle is in the most vulnerable position. The other four companies have higher credit ratings (AA/A compared with Oracle's BBB) and generate substantial positive free cash flow. This makes Oracle one of the most heavily indebted technology companies.
Anuj Kapur, CEO of CloudBees and a former technology executive during the dot-com era, compared the situation to 1998. "There is enormous potential, but also enormous uncertainty about how quickly the returns will emerge," he told Axios.
Geopolitical tensions and market volatility
In addition to its financial problems, Oracle also disappointed investors with weak operating results. Cloud revenue and cloud infrastructure revenue fell short of Wall Street expectations. The earnings outlook was also weak, raising questions about whether the company can meet its earnings-per-share targets given the rapid buildout of AI infrastructure.
Oracle co-CEO Clay Magouyrk said during a conference call: "We have ambitious, achievable goals for delivering capacity around the world." However, investors remain skeptical about whether these goals are truly achievable without taking on additional debt.
Geopolitical tensions between the United States and the European Union have also contributed to Oracle's problems, raising fears of a renewed trade war. Markets shifted into "risk-off" mode, and technology stocks with significant international operations were hit particularly hard. The VIX volatility index jumped to an eight-week high, signaling growing investor nervousness.
Oracle is now trading at $182.34 (CZK 4,195) per share, 44.5% below its 52-week high of $328.33 (CZK 7,552) from September 2025. Since the beginning of 2026, the shares have fallen 6.8%. Investors who bought $1,000 (CZK 23,000) worth of Oracle shares five years ago would now have an investment worth $2,962 (CZK 68,126).
The plunge in Oracle's shares shows that even during an AI boom, technology companies cannot escape fundamental economic realities – the physical limits of infrastructure construction and the consequences of massive debt financing.
Sources: finance.yahoo.com and fortune.com
