Oracle Corporation’s shares fell sharply on Thursday, closing down 6%, a day after hitting a record high, as investor sentiment shifted due to concerns that most of the company’s near-term growth is heavily dependent on a single client, OpenAI.
Earlier this week, Oracle’s stock soared on the back of strong quarterly performance and bullish projections. On Tuesday, CEO Safra Catz revealed that Oracle had “signed four multi-billion-dollar contracts with three different customers” during the latest quarter, causing shares to surge 30% in extended trading. On Wednesday, the stock jumped nearly 36%, closing at a record high of $328.33, and briefly lifting Oracle’s market capitalization to $933 billion.
The company’s remaining performance obligation – the measure of contracted but unrecognized revenue – ballooned to $455 billion, a remarkable 359% increase year-over-year. Oracle forecasted that its cloud infrastructure revenue would grow 14-fold by 2030, positioning itself as a key player in the AI cloud services market. The company’s build-out of data center capacity is part of a broader strategy to support AI-driven applications, especially those relying on Nvidia chips.
However, the excitement was tempered after a report by The Wall Street Journal revealed that OpenAI is expected to pay Oracle $300 billion over five years under a major agreement to build 4.5 gigawatts of U.S. data center capacity. Both companies declined to comment on the report.
Gil Luria, an analyst with a neutral rating on Oracle shares, noted in a client advisory that “our enthusiasm for Oracle’s backlog announcements is significantly tempered by the report that it came almost entirely from OpenAI.”
As a result, Oracle’s shares slid nearly 6% on Thursday, closing at $307.86 per share, down $20.68 from the previous close. The stock saw an intraday high of $335.39 and a low of $304.65, with a trading volume of 69.98 million shares. The stock opened at $330.00.
Despite the pullback, analysts believe the stock remains about 9% below the median price target of $342, signaling that many investors continue to view Oracle’s long-term prospects favorably.
Larry Ellison, Oracle’s co-founder, saw his net worth rise to approximately $387.6 billion, largely due to his 41% stake in the company, making him second only to Elon Musk on Forbes’ global wealth list.
The recent stock correction is seen as a market reaction to the concentration risk in Oracle’s growth strategy, with investor focus now shifting to how the company will diversify its client base and sustain its ambitious AI cloud expansion in the coming years.