Oracle stock plunges by half amid OpenAI concerns and investor lawsuit

Shares of the technology company Oracle have dropped by over 50% from the record high set last year. This sharp decline comes as investors sell the stock, driven by concerns about the artificial intelligence (AI) market and Oracle’s relationship with OpenAI, according to a report by Bloomberg News on Thursday.

The downturn obliterated around $463 billion in market value from a record reached in September, a peak achieved after the company’s outlook for its cloud unit signaled steep demand for AI. The report noted that Oracle’s valuation reached $933 billion at that time, positioning it as the tenth most valuable publicly traded American company.

Bloomberg remarked that rising concern among investors about AI spending has extended this fall. Specifically, investors worry about tech giants spending heavily without a clear path to return on investment. The report mentioned concerns regarding “circular deals” involving the struggling startup OpenAI and companies such as Nvidia and Oracle.

“There are some assumptions built in here about what OpenAI is going to spend and where they are getting that money, and, you know, is this really going to happen?” Eric Diton, president and managing director of investor advisory firm Wealth Alliance, told Bloomberg.

“Maybe Oracle stock got way ahead of fundamentals and now the market’s saying, alright, show me, I wanna see it.”

Oracle is also facing a proposed class-action lawsuit from bondholders who purchased $18 billion in notes and bonds the company issued in September. The investors claim Oracle made false and misleading statements in the offering documents for the debt sale.

This offering followed the company’s announcement that it had secured a $300 billion, five-year contract to provide computing power to OpenAI.

The lawsuit alleges these investors suffered losses when, weeks later, Oracle sought $38 billion in loans to fund data centers to support that agreement. The plaintiffs claim that as a result of the perceived increase in credit risk, investors drove bond prices down and yields up. Oracle has declined to comment on this litigation.