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Oracle's disappointing financial performance have erased over $70 billion from the value of the software and data giant co-founded by Trump ally Larry Ellison, intensifying growing fears of a speculative bubble in artificial intelligence stocks.

Significant Share Price Drop Comes After Sales Miss

Shares in the company tumbled by over 11 percent overnight after it posted a lower-than-expected 14% rise in sales to $16bn in the latest quarter, as it simultaneously revealed plans to ramp up its AI spending by around $15 billion.

The enterprise posted disappointing three-month sales for the quarter ending in November, with sales at its core cloud services division growing at a more modest rate than anticipated, at 34%.

Market Jitters Over Spending and Debt

Investors were also let down by a more moderate 68% growth in income from its cloud infrastructure unit.

At the same time, investors were alarmed by the company's increased forecasts for spending on artificial intelligence. It now expects capex to surge by 40 percent to $50 billion, with the vast majority of the additional spending aimed at constructing data centres.

This aggressive spending plan is set against a increasing debt load, with Oracle's corporate debt having increased by twenty-five percent over the last twelve months to reach $99.9 billion.

"Honestly, the report was not catastrophic, but it came to validate worries around heavy AI spending, funded through debt, with an unclear timeline for revenue generation," said a senior analyst.

Broader Sector Implications and Industry Concerns

Sustained excitement about the capabilities of AI technology has driven a sharp rise in market capitalizations in recent months, but there has been a rising number of warnings from policymakers and executives who say stock market valuations could tumble if investors ended up being disappointed by the development or commercial uptake of AI solutions.

While Oracle has established itself as a key tech player creating software for large corporations worldwide and has in recent years found strength in the cloud sector, analysts point to increasing questions about how reliant firms are becoming on circular funding within the AI ecosystem.

Oracle said that its measure of remaining performance obligations rose by 440% over the last twelve months. However, market watchers were skeptical when it was revealed that these contracts were driven 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 susceptible to a loss of market faith," observed a market strategist.

"Overall, strong backlog increase was not enough to calm fears about AI and the huge amount of investment spending required by companies to develop AI capacity."

Broader Sell-Off in Tech Shares

Other technology stocks also declined in after-hours trading following the Oracle results. Key performers included:

• Nvidia: Stock declined by 1.3%.
• Alphabet (Google): Shares declined by 0.3 percent.
• SoftBank: In Japan, the AI investor shares plunged by 7.7% on Thursday.