Here is Why I am Avoiding ORCL Stock
Here is why I am avoiding $Oracle(ORCL)$ stock:
It’s debt-to-equity ratio is over 500% as its heavily borrowing to fund its massive $300 billion contract with OpenAI.
If the Stargate project scales as planned, it may have to borrow additional $100 billion in the next decade.
This is a big divergence from other hyperscalers like $Amazon.com(AMZN)$ and $Microsoft(MSFT)$ that have Debt/Equity between 30-50%.
Companies like $Microsoft(MSFT)$ , $Alphabet(GOOG)$ and $Meta Platforms, Inc.(META)$ are heavily leasing capacity instead of building all themselves to avoid potential overbuilding.
In such an environment, if the demand proves persistent and ever increasing, $Oracle(ORCL)$ may emerge as the largest hyperscaler and AI infrastructure owner in a few years.
If we see excessive overcapacity, prices will fall substantially and Oracle’s AI cloud investments may struggle to pay for themselves.
The market already priced in the bullish scenario to a large extent while bearish scenario isn’t mentioned a lot.
Thus, the opportunity in the ORCL stock has shrunk significantly, while downside risk increased.
This is why I am staying out.
A bar chart titled "Debt to equity ratios of Direct AI stocks." Bars represent debt-to-equity ratios for companies including Oracle, Amazon, Microsoft, Google, and others. Oracle\'s bar is significantly taller, exceeding 500%, while others like Amazon and Microsoft show ratios between 30-50%. The x-axis lists company names, and the y-axis shows percentage values from 0% to 550%.
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