Oracle Sheds Over $300 Billion in Value Despite Its Big AI Gamble
Oracle’s long-term plan is built on reaching $166 billion in cloud revenue by 2030, supported by a massive $35 billion investment.
Quick overview
- Oracle aims to achieve $166 billion in cloud computing revenue by 2030, supported by a $35 billion investment this year.
- The company signed a $300 billion agreement with OpenAI, but concerns over dependency on a single client have led to a $315 billion drop in market capitalization.
- Analysts warn that Oracle's financial position is strained, with net debt significantly increasing and negative free cash flow projected for five years.
- Investor skepticism is rising, as indicated by the highest cost of insuring Oracle against default in three years, affecting the broader market for AI infrastructure.
Oracle’s strategy aims to reach $166 billion in cloud computing revenue by 2030.
In September, Oracle signed a massive $300 billion agreement with OpenAI, the creator of ChatGPT, positioning itself to become the AI lab’s primary infrastructure provider.
Yet just two months later, Oracle’s market capitalization has plunged by roughly $315 billion.
The sharp selloff stems from concerns that the company is becoming overly dependent on a single client. Analysts estimate that around 58% of Oracle’s future order backlog could come from OpenAI alone — a concentration of risk that investors find alarming.
Oracle’s AI gamble lacks broad support
Oracle’s long-term plan is built on reaching $166 billion in cloud revenue by 2030, supported by a massive $35 billion investment budget this year.
However, analysts warn that a large share of those projected revenues would rely heavily on OpenAI starting in 2027.
At the same time, Oracle’s financial position is becoming more strained:
- Net debt is now 2.5× EBITDA, more than double its 2021 level
- That leverage ratio is expected to nearly double again by 2030
- Free cash flow is projected to remain negative for five consecutive years
Oracle is also financing, largely through debt, the construction of a massive server farm in Abilene, Texas, designed to house more than 400,000 GPUs and 1.4 gigawatts of power — an unprecedented bet that OpenAI will generate enough revenue to justify such scale.
Growing pessimism
Investor skepticism is now widespread. The cost of insuring Oracle against default has climbed to its highest level in three years.
The fallout is broader than Oracle: companies like Broadcom and Amazon also saw their shares slide after announcing agreements with OpenAI, suggesting that markets may be cooling on hypersized AI-infrastructure bets.
In contrast, Nvidia — despite striking similar deals — has remained relatively stable.
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