Oracle shares plunge on mounting Al spending

Oracle shares plunged the most in almost 11 months on Dec 11 after the company escalated its spending on artificial intelligence (AI) data centres and other equipment, rising outlays that are taking longer to translate into cloud revenue than investors want.

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Capital expenditures, a metric of data centre spending, were about US$12 billion (S$15.5 billion) in the quarter, an increase from US$8.5 billion in the preceding period, the company said on Dec 11. Analysts anticipated US$8.25 billion in capital spending in the quarter, according to data compiled by Bloomberg.

Oracle now expects capital expenditures will reach about US$50 billion in the fiscal year ending in May 2026 - a US$15 billion increase from its September forecast - executives said on a conference call after its second-quarter results were released.

The shares fell 11 per cent to US$198.85 in New York, the biggest single-day decline since Jan 27. Oracle's stock had already lost about a third of its value through Dec 10 since a record high on Sept 10. Meanwhile, a measure of Oracle's credit risk reached a fresh 16-year high.

The latest earning report and share slide marks a reversal of fortunes for a company that just a few months ago was enjoying a blistering rally and clinching multibillion-dollar data centre deals with the likes of OpenAI. The gains temporarily turned co-founder Larry Ellison into the world's richest person, with the tech magnate passing Elon Musk for a few hours.