SAP, the German business software giant, saw its shares tumble by as much as 4.2% in Frankfurt trading on Tuesday after Oracle announced plans to ramp up its annual capital expenditure on artificial intelligence to $100bn (£79bn) over the next three years. The sell-off erased roughly €8bn from SAP’s market value and dragged the broader European tech sector lower, with the Stoxx Europe 600 Technology Index falling 1.8%.
Oracle’s chief executive, Safra Catz, told investors that the company would more than double its AI-related spending in the coming fiscal year, building out new data centres and cloud infrastructure to capture what she described as “unprecedented demand” for enterprise AI services. While the announcement boosted Oracle’s own shares in after-hours trading, it spooked rivals by signalling a willingness to outspend competitors on AI capacity — a move that analysts say could compress margins across the industry.
“Oracle is effectively raising the stakes in the AI arms race,” said Richard Hunter, head of markets at Interactive Investor. “For companies like SAP, which are also investing heavily in AI but with less aggressive capex plans, the market is now questioning whether they can keep pace without sacrificing profitability.” The sell-off spread to UK-listed software firms: Sage Group, the Newcastle-based accounting software provider, fell 2.1% to 1,042p, while AIM-listed Kainos dropped 3.4%.
The FTSE 100 ended the day largely flat, up 0.1% at 7,643 points, but the technology-heavy FTSE 350 Software & Computer Services index shed 1.2%. UK investors with exposure to global tech funds — a common holding in workplace pensions and ISAs — are now facing a reminder that the AI boom comes with acute competitive risks. “The market is pricing in a winner-takes-most dynamic, and Oracle is sending a clear signal that it intends to be that winner,” added Hunter.
For British pension savers, the immediate implication is volatility. Many default pension funds hold significant allocations to US and European tech stocks, and any sustained margin compression in enterprise software could weigh on returns. However, analysts caution that Oracle’s spending spree also validates the long-term demand for AI infrastructure, which could benefit UK-listed semiconductor and data centre firms such as Arm Holdings and Segro. “Short-term jitters aside, this is ultimately a bet on the scale of the AI opportunity,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. “The question is whether Oracle’s board has the stomach for the upfront cost.”
Source: Oracle investor presentation, Interactive Investor, Hargreaves Lansdown.