Oracle Stock Surges 36% on Record AI Cloud Backlog

In an extreme twist of fate of one of the technology giants driving the artificial intelligence revolution, the share of the Oracle Corporation dropped significantly on Friday, eliminating recent gains and generating tremors in the stock market.

The company, which is an enterprise software giant, declined by over 5 per cent to end the day at approximately $291 after being priced higher than $308 a few days ago. Such a decline followed the publication of a critical analyst report doubting the long-term viability of the fast-adoption of cloud computing and AI infrastructure by Oracle and casting uncertainty on the firm’s high revenue expectations.

A new coverage by Rothschild & Redburn analyst Alex Haissl was the triggering event, putting an Oracle Sell rating, with a price target of $175, which is 40% under the current price. The discussion that Haissl critiqued narrowed down to what he termed as an exaggeration of Oracle growing its cloud business, especially in the high-stakes data centres and infrastructure services market. The stock was quickly pushed down in high volume by investors already spooked by a week of tumultuous trading activity, with mixed economic news.

The Hype or the Substance? The Verdict of the Analyst

A report issued early on Friday by Haissl was a grim view of the course of Oracle. Central to his anxieties is the fact that the company has a bold target of making up to $60 billion per annum in revenue within its Oracle Cloud Infrastructure (OCI) segment alone—a number that would exceed the current revenues of Oracle itself. This dream, which is closely connected with AI workloads, is based on the collaboration with giants such as OpenAI and an increase in demand for computing resources based on GPUs.

In his analysis, Haissl said that the story told by Oracle about AI is compelling, but the math does not warrant the near future. He contended that the estimated 2030 earnings and free cash flow multiples incorporated in the existing Oracle valuation, which exceeds 30 times forward earnings, are not sustainable when considering competitive factors from competitors such as Amazon Web Services, Microsoft Azure, and Google Cloud. Haissl noted that these incumbents possess more capital expenditure pockets and have developed customer lock-in, making it difficult to win the estimated market share by Oracle.

Another risk that was pointed out by the analyst was execution risk, such as bottlenecks in chip supply chains of advanced chips produced by Nvidia or potential regulatory scrutiny of data centres that consume more power. The recent acquisitions made by Oracle, including a multi-year partnership to run the operations of OpenAI, have been viewed as a great move, but Haissl compared them to one-time wins that will not grow rapidly enough to justify the high price tag.

It is not the first time Oracle has had to deal with Wall Street pushback. Less than 48 hours ago, the talk about the OpenAI alliance on the stock market had sent stocks soaring to a multi-month high, with some investors speculating that the market will soon witness an impressive increase in AI usage. However, the report made on Friday changed the story and emphasised the vulnerability of tech values in a time when AI promises typically outrun deliverables.

Market Response: Tech Wide-Sell Off Is Coming?

The rally of Oracle helped a split close in Wall Street as the Dow Jones Industrial Average gained a modest 0.7% accelerated by statistics showing subdued inflation, keeping the Federal Reserve rate cut hopes still alive.

The S&P 500 increased by a slight 0.6, and the Nasdaq Composite increased by an even smaller 0.4, indicating a lack of confidence within the tech industry. The 5% decline of Oracle put a heavy burden on the subsector of software and brought down other players, such as Salesforce and Adobe, which fell within the intraday range of 2-3.

Oracle gained trading volume with more than 15 million shares exchanging hands, much higher than the average, and showed that the institutional investors were not long before cutting their holdings.

The activity of options increased as traders bought more puts, with the implied volatility surging 20 per cent as traders prepared to go further down. It is a wake-up call to AI darlings, according to one hedge fund manager, who declined to be named. The story behind Oracle was too good to be true, and had no numbers to support it.

The spillover into technology was that chip vendors such as Nvidia and AMD, with which Oracle has contracted to supply its cloud aspirations, had small pullbacks of 1-2 per cent as investors doubted whether hyperscaler spending would persist amid the drop in AI hype. Value-based industries such as energy and financials, on the other hand, stood their ground, which highlights rotation towards non-growth stocks.

In the case of Oracle alone, the decline wiped off almost $25 billion in market capitalisation within one session, which put its total valuation at approximately $800 billion. Shares have been rising 25% year-to-date, better than the market as a whole due to previous AI tailwinds, but Friday’s action is a reminder of how volatile the industry can be.

Oracle Cloud and AI Strategy: Under the Microscope

To see what is at stake, it is vital to retrace the steps that Oracle took towards the cloud. The company was a pioneer of databases, and it was a long-time leader in enterprise software with on-premises solutions. However, since 2019, the company has gambled on hybrid cloud and AI under third CEO Safra Catz and co-founder Larry Ellison (who is also CTO).

OCI supports major workloads of Fortune 500 customers today, both financial modelling at banks and drug discovery in pharma. In June, the OpenAI deal made Oracle an underpinning of the generative AI models, committing to thousands of GPUs. This has seen Ellison boast of this as a game-changer, with OCI revenue expected to reach $10 billion this fiscal year alone compared to $6.2 billion last year.

Yet, challenges abound. Oracle is trailing in market share, with only 2-3 per cent of the global cloud infrastructure versus 30 per cent of AWS. Migration out of old systems is slow and expensive, and profitability has never been achieved—OCI is actually running at a loss as capex is skyrocketing to pay to build data centres. The company has a plan to invest $20 billion in new facilities this year, and returns are likely to be years away.

Some critics, such as Haissl, suggest that Oracle is more about AI as a marketing concept than reality. Although alliances with Nvidia and AMD are credential enhancers, real adoption rates of AI capacity are not high across the industry, but are at about 20-30 per cent. Over construction may result in stranded assets in case demand weakens, just like the dot-com bust.

Oracle has countered by being defiant. Catz gave guidance in a late Thursday earnings call preview, restating a statement that the company has a strong pipeline of AI deals that could result in more than $100 billion in potential bookings. She said that they are not in search of the hype, but rather they are creating the infrastructure that the world requires. The entire Q1 2026 results, which are released next month, will provide proof points to investors.

Wider Implications to Tech and Investors

The drama of Friday at Oracle brings out more issues within the AI ecosystem. Since ChatGPT was introduced in 2022, the industry has added trillions of dollars of value, although fractures are beginning to show.

Regulators are investigating monopolistic behaviour, energy prices are soaring, and the cost of talent wars is increasing. In the case of companies such as Oracle that combine the stability of the legacy systems with the technologies of the frontiers, the balancing process is fragile.

This is also an indication of possible changes in investor sentiment. The growth-at-any-costs mode has prevailed, but as inflation slows and rates may stabilise, value hunting may become the order of the day. The various 35x to 28x earnings multiples after the decline by Oracle may appeal to bargain hunters should the execution become better.

Smaller cloud space players were feeling the heat as well. Snowflake and Datadog fell 3-4% with the misfortunes of Oracle stoking the fear of a sector-wide reevaluation. Meanwhile, such established players as Microsoft, whose Azure reign was not expected to decline, gained 1% on AI service announcements.

Oral History: Can Oracle Come Back?

The question of how Oracle manages to control the damage will all be viewed on Monday when markets open. To stem the bleeding, the company could respond with deal announcements or buyback expansions. The impact of Ellison is a wildcard; his ambitious views have united stocks in the past, but it is a risk of overkill.

In the long run, success depends on AI monetisation. OCI shares may also skyrocket above $400 should OCI meet even half of its $60 billion target by 2030. However, lost marks would be a welcome respite to the board.

At least now, Oracle is on the list of AI sky-flyers that have gravity. The crash is a warning about the need to keep in mind the basics in the pursuit of the next big thing: the basics have to be taken into consideration. One of the oldest market participants noted that AI is not a magic wand, but a tool, and tools do not work when you swing them too hard.

It is still uncertain whether this can be considered as the bottom or the beginning of a deeper correction. However, even in the hyper-competitive era of cloud computing, the future actions of Oracle will determine its legacy in the artificial intelligence era. Shareholders, prepare to get airsick.