Here's Why Oracle Stock Tumbled Today
Shares in (NYSE: ORCL) declined by as much a 6.3% in early trading today. The move comes as the market stresses the latest updates from its partner, OpenAI. Oracle has a $300 billion cloud computing deal with OpenAI, in which it is spending heavily to build out AI infrastructure to generate future revenue from the AI giant.
According to a report in the Wall Street Journal, OpenAI is missing its internal targets, and some of its management and board members are raising questions over data center spending. The news came at a bad time for OpenAI, as Tesla CEO Elon Musk's lawsuit against OpenAI CEO Sam Altman comes to trial. A win for Musk could see a shake-up at OpenAI, resulting in a change in strategic direction.
None of this is great news for Oracle, as any doubt over its partner's growth prospects and leadership casts doubt on Oracle's own growth plans. According to data from S Market Intelligence, the company's heavy capital spending will push its net debt to $176 billion in 2029, before it turns free cash flow positive again as OpenAI revenue grows strongly.
Source Fool.com
