Oracle(US:ORCL) Ge Long Hui·2025-12-22 10:57Core Viewpoint - Oracle's stock price experienced extreme volatility in 2025, soaring 42% in a single day in September before plummeting over 40%, yet still recording a 16% increase for the year, reflecting the ongoing debate in the tech industry regarding whether AI represents a generational opportunity or a potential risk [1] Group 1: Debt and Uncertainty - In early 2023, Oracle announced a joint venture with OpenAI and SoftBank, committing $500 billion to AI infrastructure, which initially sparked market enthusiasm [3] - Following the June earnings report, optimism around AI continued to drive stock prices, but a September report revealed Oracle's remaining performance obligations surged from $138 billion to $455 billion, far exceeding market expectations, leading to a record single-day stock price increase [3] - However, concerns about the returns on significant debt incurred for AI investments have emerged, with Oracle's stock dropping over 40% from its September peak [3] - Analysts noted that as Oracle and other companies issue more bonds, their leverage increases, raising associated risks [3] Group 2: Financial Performance and Strategic Execution - Oracle's total debt rose 40% year-over-year to $124 billion, while cash outflows increased from $2.7 billion to $10 billion [5] - The company quietly disclosed in SEC filings that it would incur an additional $248 billion in data center leasing commitments from Q3 FY2026 to FY2028, which are not reflected on the balance sheet [5] - Analysts expressed concerns about Oracle's tight margin for error in executing its strategy compared to larger cloud service providers like Microsoft and Google [5] - Oracle's ability to generate cash flow from data centers remains uncertain, particularly as companies exploring AI profitability are still in the early stages [5] Group 3: AI Demand and Project Delays - Investors are skeptical about whether AI demand will meet the expectations set by tech companies' substantial investments [6] - Oracle indicated that if clients cannot pay, it can quickly repurpose its AI infrastructure for other customers [6] - There are concerns that delays in Oracle's data center projects could extend the return period for AI investments, with reports suggesting a postponement of completion dates from 2027 to 2028 [7] - Despite these challenges, Oracle is included in a new national AI initiative backed by the U.S. government, which could potentially help the company navigate its debt and project uncertainties [7]