August 30, Saturday: Oracle's (ORCL) stock fell Friday, following a general decline in AI stocks. The database giant's stock fell below its 50-day moving average. Following a few days of lingering just above the key level. Oracle's stock is currently trading at 225 points, down more than 6% on the stock market today. Oracle stock has no obvious catalyst, but stocks that have benefited from optimism about generative AI were mostly down on Friday.
A mediocre week for chipmakers, who have benefited most from the initial excitement surrounding AI, is partly to blame for the drop. Following the chipmaker's earnings announcement late on Wednesday, Nvidia (NVDA), the leading AI stock, is expected to end the week lower. Late Thursday, chipmaker Marvell Technology (MRVL) gave investors a sales forecast that let them down. Alibaba Group's (BABA) rumored decision to manufacture its own AI chip in China is also having an impact on AI stocks in the US.
AI sector slowdown pulls Oracle stock below key levels
Oracle is investing billions to build data centers filled with systems, filled with advanced AI chips, that it will rent to companies, such as OpenAI, through its Oracle Cloud Infrastructure business. So, investors are sensitive to any indications about enterprise demand for AI.
With Friday marking the final trading day of August 30, Oracle stock appears set to close the month about 12% lower. The month brought a pullback from a huge rally that had Oracle stock gain 81.5% from April through July.
According to an Investor.in report, UBS analyst Karl Keirstead reiterated a buy rating for Oracle stock in a note to clients Friday. But he acknowledged there is a lot of debate among investors about Oracle stock. "The bear case on Oracle shares remains rooted in concerns about margin erosion, OpenAI customer concentration and the likelihood of negative cash flow over the next few years," Keirstead wrote. "We share these concerns but conclude they'll be trumped by the revenue growth acceleration and operating income dollar growth."
Oracle surged mainly due to positivity surrounding AI enhancing its cloud infrastructure division, OCI. OCI is a rapidly expanding competitor to the bigger companies of Amazon (AMZN) and Microsoft (MSFT) that provide cloud computing services to businesses. Oracle received a major lift last month when it revealed plans to create 4.5 gigawatts of data center capacity for OpenAI, the parent comany of ChatGPT.
Oracle's gains will be tested in next month. The tech giant is expected to report fiscal first quarter results. Oracle's quarter ends with August. The company hasn't yet announced a date the results will publish.
