Oracle stock price has suffered a major reversal as concerns about the artificial intelligence (AI) and its soaring debt remain. ORCL dropped to a low of $198, down by over 36% from its highest point this year. Its market cap has dropped from over $967 billion to $530 billion.
Oracle stock has crashed amid debt concerns
One of the main reasons why the ORCL stock price has plunged is that investors are concerns about its soaring debt. It recently raised $18 billion in debt, bringing its combined borrowings to over $100 billion.
The company intends to use these fund to fund its large data center operations. These funds are likely part of the Stargate project that also includes OpenAI and Softbank.
However, investors are betting against its stock and debt amid the rising concerns about the potential AI bubble.
Data compiled by Bloomberg shows that the price to protect against the company defaulting on it debt has jumped to 1.11 percentage points. This is equivalent to about $111,000 for every $10 million.
More data shows that the company’s CDS has jumped to about $5 billion from $200 million in the same period last year.
Concerns about the AI industry remains
Oracle stock price has also dropped because of the rising concerns about the AI industry, which some investors believe is in a bubble. Indeed, some notable investors like Masayoshi Son, Peter Thiel, and Michael Burry have dumped their Nvidia shares.
Also, while many AI companies have jumped this year, most of them have pulled back from their YTD highs. Palantir stockhas plunged by 25% from the year-to-date high. Other companies like CoreWeave, Nebius, and IREN have also tumbled in the past few weeks.
One of the main concerns about this is the web of deals that Oracle has entered in the past few months. One of this deals is its partnership with OpenAI that will see it receive $30 billion a year for data center services.
The main concern is that OpenAI does not have that money as it is expected to make between $12.7 billion and $20 billion this year. Also, OpenAI has made deals worth over $1 trillion with companies like Broadcom, CoreWeave, Nvidia, and AMD.
The most recent results showed that the company’s remaining performance obligations (RPO) jumped by 359% in its first quarter to $455 billion. Its revenue rose by 12% to $14.9 billion, while its EPS dropped by 2% to $1.01.
The daily timeframe chart shows that the ORCL stock price peaked at $345 and then plunged to the current $200. It has dived to the lowest level since June.
The stock has moved below the 61.8% Fibonacci Retracement level. It has also moved below the 50-day and 200-day Exponential Moving Averages (EMA). Dropping below these averages is a sign that bears are in control.
Oracle stock has moved below the Supertrend and the Ichimoku cloud indicators. Therefore, the most likely scenario is whre it continues falling, potentially to the 78.6% retracement level and then it starts to climb as investors buy the dip.
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