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Oracle's underwhelming financial performance have wiped more than $70bn from the market capitalization of the software and data company co-founded by Trump ally Larry Ellison, adding to escalating fears of a overheated market in artificial intelligence stocks.

Steep Share Price Drop Follows Sales Miss

Stock in the company fell sharply by over 11 percent in after-hours trading after it disclosed a weaker-than-anticipated 14% increase in revenues to $16 billion in the most recent quarter, while simultaneously revealed plans to increase its artificial intelligence investment by around $15bn.

The business recorded disappointing three-month sales for the period ending in November, with sales at its core cloud computing division expanding at a slower pace than forecast, at 34%.

Market Jitters Over Investment and Leverage

Investors were also let down by a slower than expected 68 percent increase in income from its infrastructure business.

At the same time, the market were alarmed by the firm's elevated projections for AI investment. It now expects capex to surge by 40 percent to $50bn, with the lion's share of the additional spending allocated for constructing cloud infrastructure.

This aggressive investment strategy is set against a growing debt pile, with Oracle's corporate debt having surged by 25 percent over the past year to reach $99.9bn.

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

Wider Market Implications and Industry Concerns

Continued optimism about the promise of AI technology has driven a surge in market capitalizations in recent months, but there has been a rising number of cautions from policymakers and executives who warn stock market valuations could plummet if the market ended up being disappointed by the development or adoption of AI solutions.

While Oracle has become an important technology provider creating software for major firms worldwide and has more recently grown rapidly in the cloud sector, there are increasing questions about how dependent tech giants are growing on mutual investment within the AI ecosystem.

Oracle reported that its metric of contractual revenue soared by 440 percent over the past year. However, analysts were cautious when it was revealed that these commitments were propelled by large deals from other tech giants like Meta and Amazon.

"Although these are high-quality customers, it will not placate concerns that the tech sector's AI investments are self-referential, which leaves it susceptible to a erosion of investor confidence," observed a research director.

"In summary, strong contract growth was not enough to calm fears about AI and the massive amount of capital expenditure needed by companies to build AI infrastructure."

Broader Sell-Off in AI-Related Stocks

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

• Nvidia: Share price dropped by 1.3%.
• Alphabet (Google): Stock fell by 0.3%.
• SoftBank: In Japan, the AI investor shares fell by 7.7% on Thursday.