Oracle Corporation (ORCL) saw its stock price plummet by 5.00% in intraday trading on Tuesday, following reports of significant losses from its chip rental business. The sharp decline comes as investors react to news that the tech giant lost nearly $100 million from rentals of Blackwell chips in its most recent quarter.
According to information obtained by The Information, Oracle's foray into the chip rental market has proven costly. The company's decision to offer rentals of servers powered by high-performance chips, including Nvidia's latest Blackwell architecture, appears to have backfired, resulting in substantial financial losses. This revelation has raised concerns among investors about Oracle's strategy in the competitive cloud computing and AI infrastructure market.
Adding context to the situation, it was also reported that Oracle's gross profit margin from rentals of servers powered by Nvidia chips averaged around 16% in the past year. This relatively low margin, coupled with the significant losses, suggests that Oracle may be struggling to monetize its investments in cutting-edge hardware effectively. The news overshadowed other positive developments, such as Oracle's selection by NATO's Cooperative Cyber Defence Centre of Excellence to provide 5G security solutions, as investors focused on the immediate financial impact of the chip rental business.
