The rise and fall of Oracle (ORCL) stock in 2025 has become emblematic of the central conflict of technology trading: Investors can’t decide whether AI is a generational opportunity or an imminent risk.
Oracle started the year on a high note by announcing a joint venture with ChatGPT developer OpenAI (OPAI.PVT) and SoftBank called Stargate, in which the companies committed to investing $500 billion in AI infrastructure in the U.S. President Trump announced the news in the Oval Office in January, flanked by leaders of the respective companies, including Oracle Chairman Larry Ellison, a move that sent the stock soaring.
AI optimism continued to drive Oracle shares higher following its quarterly earnings reports in June and September, with AI-powered deals set to boost cloud segment revenue to $166 billion in 2030. The stock’s rise in September briefly made Ellison the world’s richest person.
But AI euphoria quickly gave way to doubt. Investors became increasingly concerned about the growing use of debt to finance AI spending by tech companies, just as the return on that spending remains the subject of heated debate. Those concerns are evidenced by the nascent demand for Big Tech credit default swaps (CDS): financial contracts that act as insurance by allowing investors to bet on the likelihood that a company will default on its debt.
Read more: How to protect your portfolio from an AI bubble
Oracle shares have fallen more than 40% from their September high, but are up 16% so far this year.
“As these companies like Oracle have issued more debt, they have become more leveraged, which from a credit perspective means they are riskier,” said S&P Global Market Intelligence analyst Gavan Nolan, noting that CDS have begun trading for the first time even for the “Magnificent Seven” tech companies with the highest credit ratings, such as Microsoft (MSFT) and Alphabet (GOOG, GOOGL), in recent weeks.
Oracle has been at the center of debt fears. The company issued nearly $26 billion in bonds this year, according to Bloomberg data. Its CDS spreads have widened significantly, and the cost of insuring the company’s debt against default for five years hit its highest level since 2009 this month.
“Oracle has become the poster child for fears of an AI bubble,” Oracle investor and technology analyst Cory Johnson told Yahoo Finance.
Oracle declined to comment for this story.
In its latest earnings results, the tech company’s total debt rose 40% from a year earlier to $124 billion, just as its cash outflow rose from $2.7 billion to $10 billion. Analysts noted that after Oracle’s results, the company quietly disclosed in an SEC filing that it has $248 billion in additional leasing commitments beginning between the third quarter of its fiscal 2026 and 2028, primarily for data centers, which are not reflected on its balance sheet.
Morningstar analyst Luke Yang told Yahoo Finance that the dynamic means Oracle has “very little room for error” in executing its strategy.
The rise and fall of Oracle stock in 2025 has become emblematic of the central conflict of technology trading: Investors can’t decide whether AI is a generational opportunity or an imminent risk. REUTERS/Dado Ruvic/Illustration/File photo ·Reuters/Reuters
“Oracle’s free cash flow is more limited compared to other hyperscalers,” he said. Hyperscalers refer to large tech companies like Microsoft and Alphabet that operate massive data centers for their cloud businesses. “On the debt front – or other financing methods – there are a limited number of resources that can be tapped.”
Soon, he said, Oracle will have to generate cash from its data centers, but it’s unclear how soon and how well it will be able to do so, in part because the companies that will rent computing capacity from Oracle are still figuring out how to monetize AI.
Complicating matters for Oracle is its deal with OpenAI, a weak point for the stock. The ChatGPT developer accounts for the majority (at least $300 billion) of Oracle’s remaining performance obligations, a measure of future revenue from customer contracts — a detail that, once revealed, sent Oracle shares tumbling from their September peak as Wall Street questioned whether OpenAI can meet its ambitious revenue goals amid growing competition from Google.
OpenAI costs will also reach $1.4 trillion over the next eight years due to AI infrastructure deals with companies such as Nvidia (NVDA), CoreWeave (CRWV), AMD (AMD), and Broadcom (AVGO), in addition to Oracle. The commitments have made investors particularly cautious.
Investors have also been skeptical that demand for AI is as high as technology companies project.
“There is a lot of concern about whether [demand] it comes out in the same way or in the same size that is proportional to what Oracle actually has to invest now to generate a significant return,” said Andrew Freedman, analyst at Hedgeye Risk Management.
Oracle has said it could quickly repurpose its AI infrastructure for other customers if a customer can’t pay its bills.
There are also concerns that Oracle’s data center projects could face delays, which could increase the time horizon in which the company sees a payoff for AI. Bloomberg reported that Oracle pushed back completion dates for data centers tied to its contracts with OpenAI to 2028 from 2027, but the company denied any delays. And a Financial Times report this month said Oracle’s largest data center partner, Blue Owl (OWL), would not support its massive facilities in Michigan. Oracle said a capital partner other than Blue Owl was selected to finance the project.
The wave of investor skepticism has hit the company just as it is undergoing a CEO shakeup: Co-CEOs Clay Magouyrk and Mike Sicilia in late September replaced longtime CEO Safra Catz, who moved to Oracle’s board.
Oracle investor Johnson, like many who remain bullish on the company’s stock, believes in its management: “Oracle has historically delivered on its promises,” he said. “Every year and every decade, Oracle ends up winning and its competitors fall behind.”
Laura Bratton is a Yahoo Finance reporter. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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