:max_bytes(150000):strip_icc()/GettyImages-22177254481-9aa014567a1445ac9ea39c5e1b2810ae.jpg "A Bad Week for Oracle Stock Got Even Worse on Friday. Here’s Why")
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Key Takeaways
- Oracle shares dropped Friday following reports it had delayed delivery of some data centers for OpenAI.
- The stock ended the week nearly 13% lower after Oracle’s quarterly results on Wednesday fell short of expectations and amplified scrutiny of its AI investments.
A bad week for software maker Oracle (ORCL) ended on a sour note.
Bloomberg, citing people familiar with the matter, reported that Oracle had delayed by a year the delivery of some data centers it’s developing for ChatGPT maker OpenAI. The delays were caused by material and labor shortages, according to Bloomberg.
The report weighed on Oracle’s shares, already under pressure following the release of its results earlier in the week, pulling them another 4.5% lower Friday to levels not seen since June.
The company in a statement said “all milestones remain on track.”
Why This Is Important
Oracle is borrowing heavily in its bid to compete with cloud computing giants like Microsoft and Alphabet. That has made investors wary of the software giant’s data center investments.
“There have been no delays to any sites required to meet our contractual commitments,” an Oracle spokesperson told Investopedia. “We remain fully aligned with OpenAI and confident in our ability to execute against both our contractual commitments and future expansion plans.”
Friday’s losses extended Oracle stock’s Thursday drop, when shares tumbled more than 10% after the company’s quarterly earnings fell short of expectations and revived concerns about its AI ambitions. Oracle stock lost nearly 13% of its value this week.
Oracle is aggressively investing in AI infrastructure to compete with cloud computing incumbents Microsoft (MSFT), Alphabet (GOOG), and Amazon (AMZN). However, unlike its largest competitors, whose profits are paying for their data center projects, Oracle is borrowing heavily. Some investors are concerned the company will struggle to repay its debt if AI demand falls short of expectations.
Oracle’s business with OpenAI has added to investor concerns. OpenAI accounts for $300 billion, or more than half, of Oracle’s cloud computing backlog, but the start-up isn’t expected to turn a profit until the end of the decade.
Whether Oracle realizes all of its future revenue from OpenAI will depend to some extent on the latter’s ability to raise money from investors or lenders.
