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The tech firm's disappointing quarterly results have wiped in excess of $70bn from the value of the enterprise software company established by billionaire Larry Ellison, adding to mounting fears of a speculative bubble in AI-related stocks.

Steep Share Price Drop Follows Sales Miss

Shares in the company tumbled by over 11 percent in after-hours trading after it reported a disappointing 14 percent increase in sales to $16bn in the latest quarter, as it simultaneously disclosed plans to boost its artificial intelligence investment by about $15bn.

The enterprise recorded softer-than-forecast quarterly revenues for the quarter ending in November, with sales at its key cloud services division expanding at a more modest rate than projected, at thirty-four percent.

Investor Concerns Over Investment and Debt

Markets were further disappointed by a slower than expected 68% growth in income from its infrastructure business.

At the same time, investors were spooked by the company's elevated projections for AI investment. It now expects capex to leap by forty percent to $fifty billion dollars, with the vast majority of the increase directed toward constructing data centres.

This aggressive investment strategy comes amid a ballooning debt pile, with Oracle's long-term debt having surged by 25 percent over the past year to reach $nearly one hundred billion dollars.

"Frankly, the earnings release was not dramatically bad, but it served to confirm fears around substantial AI spending, financed by debt, with an uncertain timeframe for returns," commented a senior analyst.

Wider Market Implications and Industry Concerns

Continued optimism about the potential of AI technology has driven a sharp rise in market capitalizations in the past year, but there has been a increasing chorus of warnings from regulators and business leaders who say equity prices could correct sharply if the market ended up being disappointed by the development or commercial uptake of AI technology.

While Oracle has become an important technology provider developing enterprise solutions for large firms worldwide and has more recently grown rapidly in cloud computing, analysts point to increasing concerns about how dependent firms are becoming on circular funding within the AI ecosystem.

Oracle said that its measure of contractual revenue rose by 440% over the past year. However, market watchers were skeptical when it was revealed that these contracts were propelled by new commitments from other tech giants like Meta and Amazon.

"Although these are high-quality customers, it will not soothe concerns that big tech's AI investments are self-referential, which leaves it vulnerable to a loss of investor confidence," observed a research director.

"In summary, strong contract growth was not enough to alleviate fears about AI and the massive amount of investment spending needed by firms to build AI capacity."

Ripple Effect in Tech Stocks

Other AI and tech-related stocks subsequently fell in extended trading following the Oracle announcement. Key performers included:

• Nvidia: Share price dropped by 1.3 percent.
• Alphabet (Google): Stock fell by 0.3 percent.
• SoftBank: In Japan, the investment firm's shares fell by 7.7% on Thursday.