A $680 Billion Headwind Faces These 4 Tech Stocks. Should You Sell Them Now?

Core Viewpoint - Oracle (ORCL) is expected to experience significant earnings growth, with projections of 35% in 2027 and 49% in 2028, although these estimates may be revised downward following Morgan Stanley's warnings about potential depreciation charges related to AI investments [1][5][6]. Company Performance - Oracle's quarterly earnings report revealed an EPS of $2.26, surpassing expectations of $1.64, while revenue was slightly below expectations at $16.06 billion compared to $16.21 billion, marking a 14% growth [6]. - The company's remaining performance obligations surged by 438% to $523 billion, although this figure is now viewed with skepticism by investors [6]. Stock Valuation - The stock has fallen over 50%, presenting a potential entry point for new investors, with a forward P/E of 25.82x, which is 17% below its 5-year average [2]. - The stock's current valuation is close to the forward P/E of the Nasdaq 100 Index, which stands at 25.89x [2]. Market Comparison - Oracle's stock performance has been disappointing over the past year, returning -11.7% compared to the S&P 500's 14.32% return, and it has more than halved from its previous high of nearly $350 [3]. - Analysts have begun to revise their price targets downward, with Citizens lowering its target from $342 to $285 and Scotiabank from $260 to $220, while the mean Wall Street price target remains high at $297.84 [7]. Industry Context - Morgan Stanley highlighted that many hyperscalers, including Oracle, are transitioning from asset-light to infrastructure-heavy business models due to AI projects, which could lead to over $680 billion in depreciation charges collectively over the next four years [5]. - Michael Burry's bearish stance on AI investments has gained attention, particularly regarding the accounting practices of major tech companies [6].