LONDON (IT BOLTWISE) – Oracle is facing a crucial phase as enthusiasm for AI investments has given way to sober assessment. After a spectacular rise in share prices in September, sentiment has turned and investors are now concerned about the long-term viability of AI deals, particularly with regard to the partnership with OpenAI.
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Oracle has experienced a roller coaster ride on the stock market in recent months. After the company saw a massive rise in its share price in September, triggered by the announcement of a $455 billion AI-related backlog, sentiment has now cooled significantly. Investors who were once excited by the prospect of a lucrative partnership with OpenAI have now become skeptical and question the long-term viability of these deals.
The initial euphoria about Oracle’s commitment to artificial intelligence has turned into a cautious assessment of the risks. The partnership with OpenAI, initially seen as a great win, now poses potential dangers. If OpenAI is unable to make the agreed payments, Oracle could be left with significant costs. These uncertainties have led to a decline in stock prices, completely wiping out September’s gains.
Analysts still expect solid results for Oracle’s fiscal second quarter, with revenue forecast to rise 15.2% to $16.19 billion. Adjusted earnings per share are also expected to rise 11.6% to $1.64. But despite this positive outlook, investors are concerned about the large investments in infrastructure that Oracle is planning. The company plans to significantly increase its spending on servers, network equipment and semiconductors, which could strain the company’s cash balance.
Another uncertainty factor is competition in the AI sector. With the introduction of Alphabet’s new Gemini model, which is seen as a serious competitor to OpenAI’s ChatGPT, pressure is growing on Oracle to maintain its position in the market. Investors are demanding clarity on the company’s future strategy, particularly regarding capital spending and collaboration with OpenAI. To regain investor trust, Oracle must provide convincing answers to these questions.
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