Oracle shares plummeted 19% this week, marking the company’s worst performance on Wall Street in 25 years. The drop follows mounting investor concern over the firm’s $130 billion debt load and the viability of its aggressive, multi-billion dollar investment in artificial intelligence infrastructure.
Why is Oracle’s stock struggling?
The primary driver behind the recent selloff is a combination of ballooning capital expenditures and shifting market sentiment toward software companies. Oracle reported that capital expenditures surged 162% to nearly $56 billion for the 2026 fiscal year, as the company races to build out data centers to support AI workloads, specifically for clients like OpenAI. According to company disclosures, this massive spending resulted in negative free cash flow of almost $24 billion for the same period. Investors are increasingly wary of the balance sheet risk associated with this debt-heavy growth strategy.
Oracle’s recent 19% weekly decline is its steepest weekly drop since a 20% plunge in August 2001, a period that coincided with the broader collapse of the dot-com bubble.
How does Oracle’s debt strategy compare to its rivals?
Oracle is competing directly with cloud giants Amazon, Microsoft, and Google, but analysts point to a structural disadvantage in its current business model. Unlike its competitors, which often provide a full stack of integrated technology, Oracle is heavily focused on infrastructure-heavy AI bets. To fund these ambitions, the company plans to raise an additional $40 billion in debt and equity financing during the 2027 fiscal year. This comes on top of $43 billion in debt sales and $5 billion in equity issuance from the previous year, as reported in the company’s latest financial filings.
Market sentiment vs. financial reality
Despite the stock’s 55% decline from its September 2025 peak market cap of $900 billion, professional analysts remain largely optimistic. FactSet reports that 71% of analysts currently maintain a “buy” rating on the stock, the highest level of bullish sentiment in 15 years. Evercore analysts noted that while financing and leverage will remain the primary debate for investors in the near term, underlying demand signals for Oracle’s services remain strong.
What are the risks to Oracle’s long-term growth?
Beyond capital requirements, Oracle faces broader headwinds impacting the entire software sector. Many investors are concerned that generative AI models may eventually replace the core capabilities of existing software products, leading to a sector-wide selloff. The iShares Expanded Tech-Software Sector ETF (IGV) has fallen 16% so far in 2026, though Oracle has underperformed even that benchmark with a 24% decline. Additionally, the company is managing internal cost-cutting measures, having reduced its headcount by 13% to 141,000 employees over the last fiscal year, with significant pullbacks in sales and marketing divisions.
When evaluating tech stocks during periods of high capital expenditure, watch the “free cash flow” metric closely. A company burning cash to build infrastructure must eventually show that its AI services generate enough revenue to cover that debt service.
Frequently Asked Questions
- Why is Oracle borrowing so much money?
Oracle is raising capital to fund the rapid construction of data centers in Texas, Michigan, and New Mexico to meet the compute demands of AI partners like OpenAI. - Who is leading Oracle during this transition?
Co-founder Larry Ellison was absent from the earnings call this month, leaving Clay Magouyrk, Mike Sicilia, and Hilary Maxson to answer questions. - How has the stock performance affected Larry Ellison’s net worth?
While still worth over $200 billion, Ellison has been surpassed on global wealth rankings by Google co-founders Larry Page and Sergey Brin, Amazon founder Jeff Bezos, and Michael Dell due to the recent decline in Oracle’s share price.
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