What's Happening?
Oracle's stock has fallen by approximately 4%, closing at $217.88, amid concerns over AI spending and accounting practices. Michael Burry's critique of AI infrastructure depreciation has raised questions
about reported earnings quality for companies like Oracle. Additionally, Oracle's association with OpenAI has shifted from a positive to a potential negative, as investors question the feasibility and financing of large AI-compute projects. Despite the selloff, Mizuho maintains an optimistic outlook with a $400 price target, citing Oracle's cloud and multicloud momentum.
Why It's Important?
The decline in Oracle's stock reflects broader market skepticism about the sustainability of AI investments and accounting practices. As companies invest heavily in AI infrastructure, concerns about asset depreciation and capital requirements could impact earnings quality and investor confidence. Oracle's exposure to OpenAI highlights the challenges of scaling AI-compute projects, with implications for power constraints and revenue conversion timelines. The contrasting views from analysts underscore the uncertainty surrounding AI economics and Oracle's growth prospects.
What's Next?
Oracle's upcoming fiscal Q2 2026 results, expected in mid-December, will be a key checkpoint for assessing AI-backlog conversion and margin visibility. The company's annual meeting of stockholders on November 18 will provide further insights into strategic priorities and investor sentiment. Oracle's ability to navigate AI-related challenges and capitalize on multicloud opportunities will be crucial for its long-term growth.
