Youtube·2025-11-12 22:53Core Viewpoint - Oracle is viewed as a cautionary tale in the AI sector, highlighting irresponsible investment behaviors compared to more stable competitors like Microsoft, Amazon, and Google [2][3][4]. Investment Behavior - Oracle's approach to AI investment is characterized as irresponsible, particularly in borrowing to support capacity for startups, which contrasts with the healthy investment practices of its competitors [4][5]. - The company initially reported a $300 billion backlog, which was later revealed to be primarily from OpenAI, raising concerns about the validity of this demand [4][5]. Financial Performance - Oracle's gross margins in the AI business are significantly lower (30-40%) compared to its core business margins (80%), indicating potential issues with profitability in this segment [5][6]. - The stock price of Oracle has reverted to previous levels, reflecting a loss of optimism and confidence in its growth prospects [6]. Market Position - Despite challenges, Oracle's core business is growing at 5% and has a cloud segment with promising customers, suggesting some stability and potential for future growth [8][11]. - The company is involved with notable clients, including potential ownership stakes in TikTok USA, which could enhance its market position [8]. Valuation Perspective - Current valuation metrics suggest that Oracle's stock is not cheap at 32 times earnings, with a more appropriate valuation being around 25 times earnings, equating to a target price of $200 [10]. - The cloud business, while not as strong as the core business, still holds value, particularly in segments serving large customers like Zoom and ByteDance [11].