Oracle Shares Fall on AI Spending Worries; Analysts Bullish

Oracle shares fell 3.1% on Tuesday as investors weighed rising AI infrastructure costs and the prospect of higher capital spending before the company’s fiscal fourth-quarter earnings, reversing part of a 9.9% rally from Monday.

The decline followed Alphabet’s announcement that it will raise about $80 billion through a stock sale, including a $10 billion investment from Berkshire Hathaway, to expand AI compute capacity. Alphabet also updated its full-year capital spending outlook to as much as $190 billion, renewing focus on the capital required to support AI infrastructure.

Scotiabank analyst Patrick Colville wrote that Oracle’s capital expenditure needs could exceed current Wall Street forecasts. He estimated Oracle could spend nearly $100 billion over the period ending in fiscal 2027, above the consensus estimate of roughly $71 billion, and cited potential hardware inflation of about 15% as a factor.

Colville described himself as “a bit cautious” ahead of the earnings release but maintained a positive longer-term view. He noted limited visibility into customer agreement structures and future infrastructure economics and referenced management comments that development projects are “on schedule or ahead of expectations.” His model assumes roughly $800 million in annualized operating expense savings from workforce reductions, and he modestly raised his fiscal 2027 earnings estimates.

UBS raised its price target on Oracle shares to $285 from $250 and kept a Buy rating. UBS analyst Karl Keirstead reported feedback from four large customers and a contractor involved in Oracle’s AI data center project in Abilene, Texas, and found no indication that growth momentum is slowing. UBS values Oracle at about 27 times calendar-year 2027 non-GAAP earnings per share.

Investors will watch Oracle’s earnings report, scheduled for Wednesday, for details on spending plans, margin impact and management commentary about the pace of infrastructure expansion. Oracle’s stock was up 28.1% year-to-date and had risen about 28.5% over the prior week before Tuesday’s decline.

Market participants say the debate has shifted from whether AI will drive demand to how much companies must invest in compute, data centers and specialized hardware to meet that demand. For Oracle, questions focus on capital spending levels, customer contract economics and the effect of higher hardware costs on margins.