The dilemma of tech giants amid the AI spending spree: Oracle's stock price plunges significantly, and Ellison's wealth faces pressure

Oracle(ORCL.US) recently saw its stock price plummet by more than 10%, directly impacting the net worth of the company’s founder, Larry Ellison. In one day, the 81-year-old tech billionaire’s wealth shrank by nearly $25 billion, dropping from the second to the third spot on the global billionaire list.

Mismatch Between AI Infrastructure Investment and Revenue Expectations

Investors’ concerns are not about Oracle’s long-term prospects but about the current pace of cash burn. The company’s latest financial report shows that capital expenditures for AI data center construction hit a new high, reaching the $12 billion level. However, what disappointed the market was that these massive investments did not achieve the expected commercialization progress in the short term.

Competition in the cloud infrastructure sector is becoming increasingly fierce. Oracle announced this year a scaled AI compute partnership with OpenAI valued at $3 trillion and participated in the $5 trillion Stargate ultra-large-scale data center project. These figures demonstrate the company’s ambitions in the AI wave, but investors are worried: is the rate of spending already far exceeding the pace of monetization?

The bond market has sent a clear message of opposition. Oracle’s cost of credit default swaps has risen to a two-year high, and Morgan Stanley’s forecast is even more concerning — the firm estimates that Oracle’s adjusted net debt will approach a “threefold expansion” before fiscal year 2028, increasing from the current approximately $100 billion to a higher level.

Dramatic Reversal in Wealth Fluctuations

Ellison’s wealth fluctuations are a barometer of the market. Just on September 10 this year, Oracle’s stock surged 36% in a single day due to better-than-expected earnings, setting a record since 1992. That day, Ellison’s wealth skyrocketed by $89 billion, even briefly making him the world’s richest person.

Now, the stock price has already retraced nearly 40% from its high. However, it is important to note that even after this decline, Ellison’s net worth has increased by about $95 billion compared to a year ago, indicating that his long-term wealth foundation remains solid.

Cash Position and Pledge Risks of Holdings

According to Oracle’s proxy statement as of September 2025, Ellison’s on-paper cash and equivalents amount to about $34.8 billion, mainly derived from years of stock sale proceeds. But this figure needs to be discounted: a significant portion is locked in illiquid assets such as real estate and art, making it difficult for outsiders to accurately assess the truly available cash.

More concerning is the increase in pledged stock holdings. About 30% of Ellison’s Oracle shares have been pledged for personal debt financing, a roughly 25% increase from last year. Although the market value of his Oracle stock still exceeds $200 billion, the rising pledge ratio suggests an increasing financial leverage.

Strategic Transformation Under the AI Cycle Test

Oracle has been involved in cloud infrastructure for over a decade, but it has only become a significant player in the AI wave in the past two years. This time lag means the company needs to achieve a substantial balance between investment and returns in a short period.

Skepticism about its AI strategy is not unfounded. The entire tech industry is currently making unprecedented capital investments in AI infrastructure, but how to convert these investments into actual revenue remains a core challenge for all participants. Oracle, among them, must demonstrate the viability of its business model to investors over the coming quarters.

Although Ellison still possesses enough wealth to support multiple major business activities, the current market scrutiny of tech giants’ AI strategies has become extremely stringent. The AI capital-intensive cycle is testing whether these companies can find a balance between spending and profitability.