Oracle tumbled by 6% on Thursday after touching an all-time high just a day before. The drop came fast after a brutal reality check: nearly all of its hyped growth is tied to just one client, OpenAI, as Cryptopolitan reported.
The sharp reversal hit right after CEO Safra Catz told investors on Tuesday that Oracle had locked in “four multi-billion-dollar contracts with three different customers.”
That announcement pushed shares up 30% in after-hours trading, followed by another spike that closed Wednesday with a record high of $328.33.
But as soon as the market learned that most of the backlog might be coming from OpenAI, the gains vanished. Analyst Gil Luria, who holds a neutral rating on Oracle, issued a note Thursday warning that:
“Our enthusiasm for Oracle’s backlog announcements is significantly tempered by the report that it came almost entirely from OpenAI.”
The $300 billion five-year agreement between the two companies was revealed on Wednesday and left investors with more questions than answers. Oracle didn’t comment. OpenAI didn’t either.
Gil Luria questions Oracle’s real growth story
Safra said Oracle’s remaining performance obligation had surged to $455 billion, which is 359% more than the same time last year. That number sounds impressive until you realize how much of it may be from a single buyer.
And it’s not just a one-off contract. OpenAI also agreed to build 4.5 gigawatts of data center capacity in the U.S., a deal that directly benefits Oracle’s cloud infrastructure rollout.
Inside Oracle’s forecasts, the company expects its cloud infrastructure revenue to grow 14 times larger by 2030. But with so much pinned to OpenAI, even a small delay or shift in that partnership could wreck that entire projection. That’s why Gil’s warning mattered, and why the market dumped the stock.
Global markets surge as Fed rate cuts look likely
While Oracle tanked, the rest of the equity market stayed hot. Stocks across the globe hit new records this week as traders bet on rate cuts. The MSCI All Country World Index reached fresh highs for the fourth day in a row, tracking over 2,500 companies from both developed and emerging markets.
In the U.S., the S&P 500 closed at another record on Wednesday, backed by optimism that the Federal Reserve will start easing. That came after the U.S. producer price index dropped 0.1% in August, a huge surprise since Wall Street expected a 0.3% increase. The sudden weakness in wholesale prices gave investors more reason to believe that the Fed is ready to cut.
Eddy Loh, head of investment strategy at Maybank, said, “Markets have been a bit more resilient than what we’ve been expecting.” He added that the rally is fueled by strong corporate earnings and solid growth, not just in the U.S., but also in Europe, Japan, and major Asian markets.
The CME FedWatch tool now shows a 92% chance of a 25-basis-point cut at the Fed’s next meeting on September 17. That shift in sentiment also triggered risk-on behavior across Asia, where Japan’s Nikkei 225, South Korea’s Kospi, and Singapore’s Straits Times Index all broke records this week.
Marvin Loh, senior global macro strategist at State Street, said, “Given that we are building a stronger case for the Fed to restart its cutting cycle while the economy remains on a fairly solid footing, this environment serves as a tonic for risk investors.”
But none of that helped Oracle on Thursday. Investors took their gains and left once it became clear that the company’s future growth was riding on just one name.