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Oracle shares drop more than 50% since June as investors reassess AI bets
Oracle fell nearly 4% on Monday and is trading at its lowest forward P/E ratio in more than four years, at 15.5 times, while the S&P 500 trades around 20 times.
Oracle shares have plunged, down more than 50% since June 2, after a nearly 4% decline on Monday, according to Yahoo Finance AlphaSpace data. The stock is down 36% year to date, compared with a 9% gain for the S&P 500.
Yahoo Finance reports Oracle is trading at 15.5 times forward earnings, its lowest forward price to earnings ratio in more than four years, versus roughly 20 times for the S&P 500. Investors appear to be reassessing whether expectations for AI driven growth have been priced in too aggressively.
The selloff is tied to concerns that Oracle's valuation already reflects years of strong growth, even as the company continues to land large cloud infrastructure deals and benefits from demand for AI computing capacity. Investors are also watching potential margin and cash flow pressure tied to heavy spending on data centers, networking equipment, and power infrastructure to meet customer needs.
Competition is another focus, with concerns Oracle faces intense rivalry from Microsoft Azure, Amazon Web Services, and Google Cloud. Yahoo Finance also notes that about 86% of the analysts covering Oracle maintain Strong Buy or Buy ratings, despite the stock's recent decline.
Separately, Barbara Doran of BD8 Capital Partners said in a Yahoo Finance interview that the key issue is execution risk, including customer concentration and what she called the debt issue after S&P downgraded to triple B minus. She added that Oracle is essentially betting on continued demand and ample capacity to be added, even as the timeline for those outcomes remains uncertain.
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