Oracle Earnings Miss Reignites AI Bubble Fears Amid Soaring Capital Costs

2025-12-12 companies

New York, Thursday, 11 December 2025.
Oracle wiped $80 billion in value after missing revenue targets, exposing deep market anxiety over the sustainability of massive AI infrastructure spending despite broader economic resilience.

A Costly Miss for the Tech Giant

Investors in Oracle Corporation (ORCL) were dealt a harsh reality check this week, as the company’s market valuation plummeted by approximately $80 billion following a disappointing earnings report released on Tuesday, 9 December 2025 [4]. The sell-off intensified through Thursday, 11 December, with shares sinking an additional 13% as the market digested the implications of the company’s financial health [7]. While Oracle reported a revenue increase of 14% to $16.1 billion for the quarter ending in November, this figure fell short of the $16.2 billion projected by analysts [3][4]. The miss has reignited a fierce debate on Wall Street regarding the sustainability of the current artificial intelligence boom, specifically whether the massive capital expenditures required to build AI infrastructure will yield timely returns.

The High Price of Artificial Intelligence

At the heart of the investor anxiety is Oracle’s aggressive spending strategy. The company revealed it had burned through approximately $10 billion in cash during the first half of its fiscal year, largely due to heavy investments in AI capabilities [7][8]. Furthermore, Oracle plans to increase its capital expenditure by 40% to $50 billion, primarily to fund the construction of new datacenters [4]. This spending spree comes at a cost to the balance sheet; the company’s long-term debt has swelled by 25% over the last 12 months, reaching a staggering $99.9 billion as of Wednesday [4]. Consequently, the cost of insuring Oracle’s debt against default surged on Thursday to at least a five-year high, signaling growing nervousness among credit markets [5][7].

Circular Financing and Structural Risks

Compounding these financial concerns are questions about the nature of Oracle’s revenue streams. In September 2025, Oracle secured a massive contract with OpenAI involving the purchase of $300 billion in computing power over five years [3]. While revenue from customer contracts has surged by 440% over the past year, analysts are wary of potential “circular financing” within the tech ecosystem, where companies rely on each other’s funding and financing to drive growth [4]. As Kathleen Brooks, research director at XTB, noted, while contracts with major players like Meta and OpenAI are solid, they do not “placate fears that big tech’s AI investments are becoming circular,” leaving the sector vulnerable to a rapid loss of confidence [4].

Market Divergence: Tech Struggles While Broader Indices Rally

The fallout from Oracle’s earnings created a distinct split in the broader market on Thursday. While the tech-heavy Nasdaq underperformed, dragged down by Oracle and related AI stocks, the S&P 500 and the Dow Jones Industrial Average managed to reach record closing highs [5]. This resilience in the broader market was aided by a policy update from the Federal Reserve on 9 December, where borrowing costs were lowered by 25 basis points [5]. However, the contagion within the AI sector was palpable; following Oracle’s results, shares of Nvidia fell over 3.5% and AMD dropped nearly 4% on Wednesday, illustrating how closely tethered these tech giants are to Oracle’s infrastructure narrative [3].

Wall Street’s Verdict

The reaction from financial analysts has been swift and severe. As of Thursday, at least 13 brokerages had slashed their price targets on Oracle stock [7]. The sentiment was summarized by Colleen McHugh, a consultant to Wealthify, who observed that many tech stocks are currently “priced for absolute perfection,” meaning even a small revenue miss results in significant penalties from investors [3]. With Oracle’s cloud computing business growing at 34%—slower than the forecast—and its infrastructure business growing at 68%, the company faces an uphill battle to prove that its massive capital outlays will translate into sustainable, long-term profit rather than just a short-term cash burn [4][7].

Sources

AI bubble corporate earnings