Oracle stock hits 52-week low as Microsoft winds down AI cloud deal

Oracle stock fell to a 52-week low of $109.21 on Nov. 6, down from a peak of $250.25 in June, after Microsoft began winding down its deal to rent AI cloud capacity from the company.

Shares traded at $114.42, down 0.64%, at 1:40 p.m. ET, according to CNBC. The stock has fallen more than 50% from its June peak in five months. The 52-week low was set during trading today.

Microsoft is reportedly winding down its agreement to rent AI cloud computing capacity from Oracle, according to Bloomberg. The deal was part of Oracle’s push into AI infrastructure, which had driven the stock’s rally earlier in the year.

Larry Ellison, Oracle’s founder and chief technology officer, fell out of the top 10 billionaire rankings as the stock plunged, according to Forbes. Ellison’s fortune is tied to Oracle shares.

The decline comes amid broader concerns about the AI trade. An investor asked “Where’s the Cash?” about Oracle stock, according to TipRanks.

Oracle reports earnings on Dec. 14. The company’s price-to-earnings ratio is 17.96, according to CNBC.

What the coverage missed

The coverage focused on the stock price and Ellison’s ranking. The part that got less attention is the Microsoft deal.

Oracle’s AI cloud business depends on large customers renting computing capacity. Microsoft was one of those customers. If Microsoft is winding down its deal, Oracle loses a source of revenue that justified the stock’s earlier rally.

The stock peaked at $250.25 on June 1. It fell to $109.21 on Nov. 6. The decline is not a correction. It is a halving. The market is repricing Oracle’s AI business.

The repricing is about revenue. Oracle’s cloud revenue grew on the back of deals like the one with Microsoft. If those deals are temporary, the revenue is temporary. The market is questioning whether the AI cloud business is sustainable or a one-time surge.

What I think

Oracle stock fell 50% in five months. The decline started when the AI narrative stopped working. Microsoft winding down its cloud deal is the signal.

Oracle’s rally was built on AI infrastructure. Companies rented Oracle’s cloud capacity to train AI models. The revenue grew. The stock grew. The story was that Oracle was an AI infrastructure company.

The story is changing. Microsoft is pulling back. If the largest customers are temporary, the revenue is temporary. The market is pricing in a business that grows during an AI buildout and shrinks when the buildout ends.

Ellison fell out of the top 10 billionaire rankings. His fortune is tied to the stock. The stock is tied to the AI narrative. The narrative is tied to deals like the one Microsoft is winding down.

Oracle reports earnings on Dec. 14. The numbers will show whether the AI cloud revenue is holding or fading. The stock has already given its answer. It is down 50% from June. The market is not waiting for the earnings report.