Friday’s trading session became a litmus test for investor sentiment around the artificial intelligence sector. Oracle, the tech giant trying to catch up with cloud leaders, was faced with a Bloomberg News report suggesting serious delays in building infrastructure for OpenAI. According to the report, labour and material shortages were said to be postponing the finalisation of key data centres until 2028. The company’s response was immediate and decisive. Oracle spokesperson Michael Egbert denied any slippage in a statement to Reuters, assuring that all “milestones remain on track” and that the company is fully meeting its commitments to the ChatGPT developer.
Despite the dementia, market nervousness was evident. Oracle shares lost nearly 3% during the session, dragging down other beneficiaries of the AI boom such as Nvidia, AMD and Arm Holdings. This discount, however, is not solely the result of a single article. Investors are increasingly wary of Oracle’s aggressive strategy, having entered the fray with a massive $300 billion deal with OpenAI. In order to fund this arms race, the company has been forced to significantly increase its debt, which in a high interest rate environment raises legitimate concerns. The cost of securing the company’s debt against insolvency reached its highest level in five years on Thursday.
The situation sheds light on a wider industry problem. Bottlenecks are shifting from chip manufacturing to mundane infrastructure issues: energy availability and the pace of construction work. Physical constraints are now becoming as much of a risk factor as the technological capabilities of the algorithms themselves. The market, which until recently uncritically rewarded every announcement of AI spending, is beginning to demand specifics and profitability.
Warning signals are also coming from elsewhere. Broadcom reported a decline of more than 11 per cent after warning that growing sales of custom AI processors – while volumetrically impressive – were negatively impacting margins. This shows that the ‘blank cheque’ era for AI development is coming to an end. Investors are becoming choosy and Oracle, despite assurances of timeliness, is under pressure to prove that it can manage not only the technology but also the growing financial risks.
