Shares of software giant Oracle (NYSE:ORCL) — which specializes in enterprise-level database software and technology — suffered a sharp decline on Friday. The volatility follows the company’s executive forum for artificial intelligence (AI), which details how Oracle’s corporate clients can convert the broader AI vision into tangible business results. While many analysts defended ORCL stock, it’s difficult not to notice the possibility of a hype correction.
Among the topics in the forum on Thursday, Oracle discussed leveraging AI protocols to boost productivity. As well, it offered practical considerations for implementing AI infrastructure in cloud computing networks. Further, the tech stalwart brought generative AI use cases to the table and how they confirm utility for application development.
If that wasn’t enough, Reuters reported that Oracle subsidiary NetSuite will be adding generative AI capabilities to its finance software. This add-on will facilitate the automatic writing of collections letters or chasing down purchases of supplies that have been delayed. Unfortunately, these potential catalysts weren’t enough to lift ORCL stock, which dipped about 6%.
Nevertheless, several analysts — including Mizuho Securities analyst Siti Panigrahi and Guggenheimer analyst John DiFucci — reaffirmed their bullish assessment of Oracle. In particular, they expressed confidence that Oracle will effectively utilize AI to eventually expand offerings.
ORCL Stock Suffers From the Hype Problem
Notably, JPMorgan Chase analyst Mark Murphy also chimed in, expressing optimism for ORCL stock. Specifically, Murphy stated that bookings will be longer than expected, benefitting fiscal year 2025 more so than FY 2024. That also aligns with DiFucci’s longtail outlook. Still, it’s difficult for investors to ignore the possibility of the AI hype train derailing.
Many other major software giants — including Microsoft (NASDAQ:MSFT) — fell in sympathy with ORCL stock. However, arguably the biggest crack in the armor centers on Nvidia (NASDAQ:NVDA). After plowing through Wall Street with its AI-oriented graphics processors, NVDA has struggled to impress investors. In the trailing five sessions, shares slipped more than 8%.
For one thing, it may not be a coincidence that ORCL stock is hurting at the same time. Per Seeking Alpha, Oracle and Nvidia expanded their existing partnership to further expand AI adoption in enterprise cloud networks.
However, a bigger headwind stems from concerns that AI is reaching peak utility. According to research firm Gartner, generative AI may be overhyped. As well, the concept may have reached the top of “inflated expectations” for emerging technologies this year. Close behind the hype train, per Gartner, is the idea behind AI-augmented software engineering and cloud-native technology.
“Emerging technologies are disruptive by nature, but the competitive advantage they provide isn’t yet well-known or proven,” stated the research firm’s report.
Why It Matters
According to TipRanks, analysts currently peg ORCL stock as a consensus moderate buy. This assessment breaks down as 12 buys, 11 hold sand zero sell ratings. Overall, the average price target lands at $129.92, implying more than 27% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
