Oracle shares dropped 12% on Thursday after the company disclosed an ambitious spending program to expand AI infrastructure, stoking investor worries about cash consumption and a growing debt burden. If sustained, the fall would mark Oracle’s largest one-day decline since January of last year and would eliminate roughly $72 billion from its market capitalization, which stood at about $578.83 billion.
Once a relatively smaller presence in cloud computing, Oracle has recently secured substantial data-center contracts with OpenAI and Meta as it seeks to challenge larger rivals such as Amazon and Microsoft. The push, however, comes at a cost: unlike the biggest tech firms, Oracle does not generate the same scale of free cash flow to self-fund a rapid rollout, prompting the company to increase cash burn and turn to debt and equity markets for financing while its traditional software revenue faces pressure from the very AI tools the company aims to host.
Analysts highlighted the strain. "Oracle’s accelerated data center buildout is pressuring near-term gross margins and raising investor questions around CapEx, funding, and returns," said Citizens JMP Securities. Melius Research added caution about execution and competitive dynamics, noting: "It is hard to know if Oracle can stick to this capex plan if incremental business arises from the likes of OpenAI and Anthropic. Also, its competitors are unlikely to slow spending and could use Oracle’s spending moderation as the means to gain share."
On the funding side, Oracle expects net capital expenditure of around $70 billion in its current fiscal year to support AI data centers for customers including OpenAI. To help finance that program, the company said it will raise about $40 billion in debt and equity, which includes a previously announced $20 billion stock sale. In the fiscal year ended May, Oracle raised $43 billion in debt financing and $5 billion in equity.
The scale of planned spending widened Oracle’s free cash flow deficit significantly. For fiscal 2026, the company’s free cash flow shortfall is projected at $23.7 billion, up from a deficit of $394 million in fiscal 2025.
Investors also weighed valuation and competitive pressures. Oracle trades at 24.56 times estimated earnings for the next 12 months, according to LSEG-compiled data, versus Microsoft at 20.47 times and Amazon at 25.19 times. Oracle additionally faces competition from specialized AI cloud providers such as CoreWeave.
The stock’s decline had spillover effects in Europe’s information technology sector, which was already under downward pressure following a separate downgrade by UBS Global Wealth Management. Software giants SAP and Capgemini saw their shares fall, with SAP down 4.4% and Capgemini sliding 3.6%.
Market participants have flagged broader industry trends that could affect financing and demand for hyperscale infrastructure. Morgan Stanley expects global AI-related debt issuance to more than double to nearly $570 billion in 2026 and projects hyperscaler spending to exceed $1 trillion by 2027; such forecasts underscore the scale of capital markets and spending activity being directed into AI-related infrastructure.
For Oracle, the near-term picture centers on execution of an outsized capex program and its ability to manage funding without eroding investor confidence. The company has committed to a large increase in spending to meet customer demand for AI hosting, but that strategy has intensified scrutiny of margins, capital allocation and potential impacts on returns.
With heightened cash burn and sizeable planned capital raises, investors are weighing whether Oracle can sustain its accelerated buildout and how competitors might respond. The outcome of that assessment will likely shape investor sentiment in the coming quarters as the tech sector adjusts to surging AI investment requirements.