Oracle’s AI Cloud Margins Spark Investor Concerns Amid Nvidia Partnership

Oracle shares tumbled 5% following revelations of razor-thin 14% gross margins on $900 million in Nvidia-powered cloud sales. The figures pale against Oracle's typical 70% profitability, exposing the brutal economics of its AI infrastructure push.

The disconnect between spending and returns raises existential questions about Oracle's cloud pivot. While projecting $144 billion in 2030 infrastructure revenue, current pricing strategies appear unsustainable. Project Stargate—the OpenAI data center partnership—now carries disproportionate weight in Oracle's growth narrative.

Investors punished the stock as internal documents revealed the company is essentially renting Nvidia's prized AI chips at near-cost. The margin compression highlights the precarious bet: Oracle's cloud ambitions now hinge on hyperscaler demand and Nvidia's hardware dominance.