Oracle Drops for Fifth Consecutive Day — Why It Didn’t Join the AI Stock Rebound

According to MarketWatch, Oracle's (ORCL-US) stock price has long been seen as moving in tandem with news related to OpenAI, and this correlation caused the stock to decline for a fifth consecutive day on Tuesday (the 15th).

On Monday, after executives from OpenAI and other prominent AI companies called for more responsible AI model development, shares of companies selling products or services to OpenAI broadly declined.

However, while chip stocks rebounded on Tuesday, Oracle's share price dropped another 3%. Over the past five trading days, the stock has fallen 14.18% cumulatively.

Oracle is highly linked to OpenAI's development. The company took on substantial debt to support a large-scale cloud computing capacity expansion plan aimed at backing the future growth ambitions of the ChatGPT developer.

Yet recently, there has been a surge of news in the OpenAI space. This includes recent comments by CEO Sam Altman, who stated in an interview with Fortune that, given the current safety landscape, OpenAI will not pursue an initial public offering (IPO) this year.

Patrick Walravens, Head of Technology Research at Citizens, noted that some investors are beginning to worry that recent discussions around 'controlling the pace of advanced AI development' could lead advanced AI labs like OpenAI and Anthropic to adopt more cautious spending strategies. This refers to recent statements by Anthropic CEO Dario Amodei advocating for slowing down AI development.

Walravens also mentioned that investors may similarly fear future government regulation of AI, which could also slow spending across the AI industry.

Gil Luria, analyst at D.A. Davidson, believes Oracle occupies a unique position in this market. The company has the 'backlog' of a major cloud provider (hyperscaler), yet carries the risk profile of a new cloud provider (neocloud).

As of the end of the August quarter, Oracle reported a remaining performance obligation (RPO) of $66.4 billion.

Meanwhile, FactSet data shows Oracle's net debt stands at $88 billion.

Luria stated, 'If AI development slows down, it could ultimately reduce market demand for AI computing power, and the biggest impact would be on new cloud providers, especially those with high leverage.'

Other AI cloud companies were also sold off by the market. CoreWeave (CRWV-US) shares fell for a fifth consecutive day, down 19% cumulatively. Nebius Group (NBIS-US) declined for five straight days, falling 16% during the period.