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Oracle (NYSE:ORCL) stock continued its downward trend this week, reaching its lowest level since February 2024. It dropped to $109.17, down by 68% from its all-time high. This sell-off may continue as Microsoft (NASDAQ:MSFT) starts winding down its computing deal.

Microsoft is Unwinding its Deal With Oracle

Oracle stock continued falling as investors reacted to reports that Microsoft is winding down its arrangement to rent AI computing from the company. 

According to Bloomberg, Microsoft has begun shutting down computing capacity it rented from Oracle after choosing not to renew the contract. The move followed Oracle’s supply of older-generation chips, which no longer met Microsoft’s specifications.

Still, Oracle maintains that its business is doing well, with its revenue jumping by 30% in the first quarter to $19.3 billion. Its cloud infrastructure revenue jumped by 61% to $11.6 billion, while the remaining performance obligations (RPO) soared to $664 billion.

The challenge, however, is that other companies may decide to scale down their deals with Oracle. Just this week, the company decided to walk away from a $7 billion computing deal with Tencent, a Chinese company. There are concerns that 

Oracle stock also continued its strong sell-off after the company announced a new $20 billion cash sale. It is raising $10 billion in stock sale and $10 billion through debt offerings. It plans to use these funds to accelerate its data center rollout and for general corporate purposes. 

Investors have remained concerned about the company’s soaring debt load, which has jumped to $169.14 billion, up sharply from $84 billion last year. As a result, its bond yields have continued rising as concerns about the AI industry remain. 

Oracle Stock is at Risk of Further Downside

ORCL stock chart | Source: TradingView

Technicals suggest that the ORCL stock could be at risk of further downside in the near term. It has dropped below the 78.6% Fibonacci Retracement level of $120.38. 

The stock is about to form a death cross as the spread between the 50-week and 200-week moving averages narrow. It has also dropped below the Supertrend indicator. 

Most notably, the stock has formed a head-and-shoulders pattern. Therefore, there is a risk that the stock will continue falling, potentially to the psychological level of $100. 

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