Why Oracle Stock Fell Quickly Today
Key Points
Ellison abandoned his plan to sell up to 50 million shares of Oracle.
AI stocks slid on rising concerns about regulation.
An interest rate hike could make Oracle's debt more expensive.
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Shares of the artificial intelligence cloud provider Oracle (NYSE: ORCL) slid this morning after a report over the weekend showed that co-founder Larry Ellison was abandoning plans to sell up to $7.5 billion worth of Oracle stock.
That sort of news would typically cause a share price rally, but Ellison's move came as investors sold some AI stocks today, amid calls from Anthropic and OpenAI for more artificial intelligence regulation.
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Adding to investor pessimism today is the growing belief among investors that the Federal Reserve may hike rates at its next meeting. That could make Oracle's current AI spending even more expensive than it already is.
Oracle stock was down by 4.5% as of 11:04 am ET.
Image source: The Motley Fool.
Shifting sentiment
The first piece of news Oracle investors were processing this morning was that Ellison changed his mind about selling up to 50 million shares of the company, a plan that had originally been set in motion in June.
Ellison controls about 40% of Oracle, so his stock sales are watched very closely. And, usually, a reversal on selling such a large number of shares would give the stock a boost. But that didn't happen, likely because investors paired the news with a broader pullback in AI stocks today.
Warnings of misaligned AI systems recently compelled leaders at Anthropic and OpenAI to call for increased government regulation of the industry. Anthropic CEO Dario Amodei also urged AI companies, including his own, to slow down their pace of AI model development.
OpenAI CEO Sam Altman welcomed the potential slowdown and also said over the weekend that OpenAI wouldn't go public until next year, noting that there needs to be more focus on AI safety right now.
That sent many AI stocks tumbling, including Oracle's shares.
A potential Fed rate hike didn't help either
An inflation report released last week showed that wholesale prices continued climbing higher in August. That news came as oil prices continued rising because of the war in Iran.
These have raised the likelihood that the Federal Reserve could raise interest rates later this week. That could put a damper on Oracle's spending, which has ramped up to build out AI data centers. Higher rates mean Oracle's debt expenses could climb higher than they already are.
Given the concerns, it's not surprising to see Oracle's shares retreating today.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
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