Oracle shares fall as high AI spending and debt plans spook investors

Oracle shares fell on Thursday after the cloud giant’s higher-than-expected capital spending plans fueled concerns about skyrocketing AI data center costs, overshadowing solid quarterly results.

Shares of the Austin, Texas-based company fell 7.2% to $186.70 in premarket trading and were on track to erode more than $40 billion from the company’s market valuation if the losses continued.

The drop also weighed on the European IT sector, which was already under pressure following a downgrade by UBS Global Wealth Management. SAP shares fell 4.4%, while Capgemini fell 3.6%.

As Oracle struggles to keep pace with its hyperscale rivals, its mounting debt and stressed cash flows are fueling doubts about when such massive spending will pay off.

Oracle said late Wednesday that it expects capital expenditures of up to $95 billion in fiscal 2027, with plans to raise nearly $40 billion through a combination of debt and equity financing in 2027.

The company spent $55.66 billion in fiscal 2026, surpassing its $50 billion target, following an announcement in February that it aimed to raise $50 billion through debt and equity sales.

“Unlike so-called ‘hyperscalers’…, Oracle is not sitting on a pile of cash nor generating huge amounts of cash flow as it enters this spending cycle,” said Russ Mould, chief investment officer at AJ Bell.

“This leaves it more at the mercy of the markets when it comes to financing any investment, and investors appear to be reluctant about plans to raise another $40 billion.”

However, analysts at JP Morgan see this as a necessary trade-off to drive stronger revenue growth over the long term.

The brokerage said steady demand should support investor optimism as long as Oracle’s cloud business continues to grow faster than that of major hyperscalers.

JP Morgan, however, pointed out some execution risks, including expanding data centers, maintaining reserves and managing its growing debt load.

Morgan Stanley expects global AI-related debt issuance to more than double to nearly $570 billion by 2026, with hyperscalers’ spending forecast to surpass $1 trillion by 2027.