Why Oracle Stock Is Down Today
Oracle is selling $10 billion in new stock and $10 billion in bonds to keep its AI buildout funded, and while the raise fits the cap it promised just last week, I'm not entirely convinced it will be the last one.
Oracle Corporation's stock (ORCL -6.59%) has dropped 6.9% on Monday, Nov. 2, following the company's announcement of a $20 billion fundraising plan, a combination of new shares and bonds. The S&P 500 and Nasdaq Composite markets, however, are up by 0.2% and 0.1%, respectively. Oracle plans to distribute the funds in two parts: $10 billion in new common stock and $10 billion in senior notes. The company intends to utilize the cash for capital spending, paying down other debts, and future investments or acquisitions.
While the stock decline may seem alarming, it is not entirely unexpected. Oracle had previously revealed its intention to raise up to $20 billion for its AI expansion by fiscal 2030. Still, investors seem uncertain about the additional raise. If Oracle adheres to this limit over the next few years, it may help alleviate concerns about the sustainability of its AI investments.
Nevertheless, there is a lingering doubt that capital spending could increase while revenues are delayed due to construction delays and political opposition in data center projects. Given these considerations, I am not entirely convinced that Oracle's strategy will be successful and fear that capital spending could expand, potentially exacerbating existing concerns.
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