Shares of U.S. cloud software company Oracle soared more than 40%, but bubble warnings are growing amid market cheers. Massive artificial intelligence (AI) infrastructure contracts pushed the stock higher, but critics say it evokes memories of the 1999 dot-com bubble.
According to CNN on the 11th (local time), Oracle shares jumped 36% in a single day on the New York Stock Exchange (NYSE) the previous day and rose as much as 43% intraday. It was the biggest gain since 1992. Its market capitalization topped $920 billion, swelling by more than $300 billion in an instant. Oracle co-founder Larry Ellison added more than $100 billion in asset in a single day to become the world's richest person.
The catalyst was not flashy quarterly results but a long-term outlook. Oracle projected that cloud infrastructure revenue will surge tenfold from $10.3 billion in fiscal year 2025 to $144 billion in fiscal year 2030. It also announced that its remaining order backlog reached $455 billion, up 359% from a year earlier, concentrating investor buying. The figure far exceeded the growth rate the market had expected.
The key driver of this outlook is its cooperation with OpenAI. Oracle has signed multibillion-dollar deals with super-sized AI customers including OpenAI, SoftBank, and the jointly pursued "Stargate" project by Oracle, among others. Oracle provides data centers and cloud infrastructure, and OpenAI uses them to expand large-scale services such as ChatGPT.
But some say the market's excitement is excessive. On Wall Street, skepticism has been raised that Oracle's outlook is overly rosy. Steve Sosnick, chief strategist at U.S. securities firm Interactive Brokers, said, "If a lesser-known company had presented these numbers, it would have been suspected of being false," adding, "Oracle is showing the mirror effect of the AI bubble."
In particular, Oracle's growth outlook relies too heavily on OpenAI's profitability. However, OpenAI is analyzed to face a heavy financial burden as its cash burn accelerates. Information outlet The Information reported that OpenAI is expected to spend about $115 billion from this year through 2029. That is more than $80 billion above previous projections.
Oracle's aggressive investment is also seen as a burden. Oracle plans to spend $35 billion in this fiscal year alone on expanding data centers and more, which amounts to more than half of its sales. Compared with the 13% investment-to-sales ratio last year, it is a sharp expansion. Peter Boockvar, chief investment officer (CIO) at asset manager OnePoint BFG, said, "Such capital-intensive investment is unprecedented in Oracle's history," adding, "It is impossible not to question its sustainability."
The surge in tech stocks riding the AI boom rippled across the broader market. After Oracle released its outlook, shares of semiconductor corporations including Nvidia, AMD, and Broadcom rose in unison, and the Philadelphia Semiconductor Index climbed more than 2%. However, some corporations such as Apple and Amazon were weak, revealing a divergence in investor sentiment.
Experts say Oracle's spike clearly reflects expectations for growth in the AI industry while also increasing the likelihood of a pullback due to overheating. Strategist Sosnick said, "Oracle's market revaluation can be justified, but at the same time it evokes the shadow of the 1999 dot-com bubble."