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Oracle shares fell 14% on Thursday, weighing on broader AI trading.
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The technology leader reported lower-than-expected quarterly revenue, raising concerns about overspending on AI.
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This is the latest warning sign for investors worried about massive capital spending on artificial intelligence.
Oracle just raised a new red flag for investors concerned that tech companies are getting ahead of themselves when it comes to huge capital expenditures.
Oracle The company's shares fell 14% on Thursday after the tech giant reported higher profits but delivered revenue that fell short of Wall Street estimates, coming in at $16.06 billion, compared with the $16.21 billion analysts had expected. Cloud sales rose 34% from the previous quarter, but also missed estimates.
Importantly, Oracle also pledged to spend about $15 billion more next year than previously forecast, raising new concerns about aggressive capex among major tech companies.
The drop in the tech titan's shares was enough to put pressure on other artificial intelligence companies and drag markets lower in Thursday's session.
Here's where the major indexes stood Thursday at 9:30 a.m. ET.:
• Nasdaq 100: 25,563.72, down 0.8%
Oracle shares have been very volatile lately, falling nearly 20% over the past month after a huge surge following blockbuster revenue forecast released in September.
This flurry of deals cemented the company's position as a powerhouse in the artificial intelligence space, announcing $300 billion contract with OpenAI, new partnership commitments with both Nvidia And Meta platforms, and plans to expand its artificial intelligence and cloud computing infrastructure in fast-growing international markets.
Now Oracle's modest earnings are fueling speculation that its big plans in this area will take a while to pay off and that its spending plans are too ambitious. Morgan Stanley called the results a moment when investors could renew their distrust of AI trading.
“The rise of cloud at the bottom of the pack with increasing pressure on gross margins and operating margins could further erode investor confidence in ORCL's ability to operate effectively in a large and growing GPUaaS business, leaving the stock lacking a clear catalyst,” the bank's analysts wrote on Thursday.
Several other high-growth AI stocks fell on Oracle's earnings report, dragging the overall S&P 500 index down 0.31% in pre-market hours, while the Dow Jones Industrial Average and the Nasdaq Composite rose slightly.
Here are some of Thursday's biggest losers:
Nvidia: -3%
