Oracle (ORCL.US) stock fell more than 4% in premarket trading on Tuesday, reversing some of the nearly 10% gain it posted during the previous session. The decline was not due to weakening company fundamentals, but rather investors’ growing concerns about the cost of expanding artificial intelligence infrastructure. Alphabet (GOOGL.US) stock also fell nearly 3% after the company announced plans to raise about $80 billion through a stock offering to fund investments in next-generation technology.
Important points
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Oracle fell more than 4% in pre-market trading after its stock hit its highest since November during pre-market trading.
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Alphabet plans to raise $80 billion through a stock sale and use the proceeds to invest in AI infrastructure.
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Investors are increasingly focused not only on AI’s growth potential, but also on the large amounts of capital needed to support it.
Alphabet highlights the scale of AI spending
Oracle’s decline was triggered by Alphabet’s announcement of an $80 billion stock offering. Berkshire Hathaway is expected to invest about $10 billion in the deal. The funds raised will be used to expand data center capacity and computing infrastructure needed to meet the growing demand for AI services.
The move highlights how expensive the race for AI leadership is becoming. Back in April, Alphabet increased its annual capital spending budget by up to $190 billion. For investors, this is a reminder that success in AI depends not only on technology and customer demand, but also on access to significant capital.
Why are investors reacting through oracles?
For Oracle, the AI boom may be a double-edged sword. Meanwhile, the company is benefiting from increased demand for cloud infrastructure and enterprise software solutions. Meanwhile, investors are beginning to question how long technology companies can continue to finance large-scale AI investments without straining their margins, balance sheets and future funding needs.
As a result, the market is increasingly focused on not only which companies can benefit from artificial intelligence, but also which companies will ultimately bear the greatest costs in building the infrastructure behind artificial intelligence.
Source: xStation5
