Oracle’s plunging stock shows the AI boom is running into two hard limits: physics and debt markets
Oracle’s rapid descent from market darling to market warning sign is revealing something deeper about the AI boom, experts say: no matter how euphoric investors became over the last two years, the industry can’t outrun the laws of physics—or the realities of debt financing.
Shares of Oracle have plunged 45% from their September high and lost 14% this week after a messy earnings report revealed it spent $12 billion in quarterly capital expenditures, higher than the $8.25 billion expected by analysts.
Earnings guidance was also weak, and the company raised its forecast for fiscal 2026 capex by another $15 billion. The bulk of that is going into data centers dedicated to OpenAI, Oracle’s $300 billion partner in the AI cycle.
“We have ambitious achievable goals for capacity delivery worldwide,” Oracle co-CEO Clay Magouyrk said on an earnings call this week.
Investors worry how Oracle will pay for these massive outlays as its underlying revenue streams, cloud revenue and cloud-infrastructure sales, also fell short of Wall Street’s expectations. Analysts have described its AI buildout as debt-fueled, even though the company does not explicitly link specific debt to specific capital projects in its filings.
And by Friday, even the crown jewel of Oracle’s AI strategy—its OpenAI data centers—was showing cracks. Bloomberg disclosed that Oracle has pushed back completion of some U.S. data centers for OpenAI from 2027 to 2028 because of “labor and material shortages.”
“It’s perfectly plausible that they’re seeing labor and materials shortages,” said data-center researcher Jonathan Koomey, who has advised utilities and hyperscalers including IBM and AMD. In his view, the AI boom is running directly into the difference between digital speed and physical speed. “The world of bits moves fast. The world of atoms doesn’t. And data centers are where those two worlds collide.” [Continue reading…]