AI Strategy Shake-Up Sparks Market Jitters As Oracle Shares Plunge 25%

Oracle's stock has been in a near-freefall, plummeting approximately 25% over the past month in a rout that has wiped out billions in market value. The sharp sell-off represents a dramatic reversal for the company, which had seen its stock soar earlier in the year on the promise of its AI-driven cloud business.


The market jitters are not due to a change in Oracle's strategy, but rather a sudden and harsh reckoning with the massive cost of that strategy. Leaked internal documents and recent reports have revealed that the company's aggressive push into AI cloud computing is operating on razor-thin profit margins, sparking panic among investors that the AI boom may not be the profit engine they had hoped for.

The High Cost of Chasing AI
The core of Oracle's AI strategy has been to spend heavily to build out 100 new data centers and lock in massive contracts with AI leaders, including a reported $300 billion deal with OpenAI. While this secured headline-grabbing growth, new details show the cost of this expansion is eroding profitability.

Leaked documents reportedly show that Oracle's gross margins for its AI cloud business—which largely involves renting out high-demand Nvidia-powered servers—are as low as 14%. This figure shocked investors, as it stands in stark contrast to the healthy margins of its key competitors, Amazon Web Services (30-35%) and Microsoft Azure (40%+).


Reports have even surfaced of a $100 million loss related to Nvidia chip rentals, fueling fears that Oracle is sacrificing all profit to simply buy market share.

Market Re-evaluation
Investors are now re-evaluating the company's entire narrative. The "growth-at-all-costs" model, which involves taking on significant debt to fund its massive data center build-out, is now being viewed as a high-risk gamble.


While Oracle's cloud infrastructure revenue is growing, the market is concerned that this growth is "unprofitable." The 25% stock plunge reflects a new consensus: the massive capital expenditure required to compete with Amazon and Microsoft in the AI arms race may be too expensive to scale sustainably, leading to a severe squeeze on earnings that no longer justifies the stock's previously high valuation.