Should You Buy Oracle Stock Right Now?
Key Points
Oracle's OCI revenue is growing 66% YOY, outpacing AWS and Azure.
Oracle is selling profitable business units and accumulating tens of billions in debt to fund the data center expansion needed to capture AI demand.
The majority of Oracle's massive backlog depends on OpenAI, a company whose financial picture is far from reassuring.
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If the artificial intelligence (AI) buildout plays out the way bulls expect, Oracle (NYSE: ORCL) is positioned to win big.
Oracle is all in on AI
Oracle Cloud Infrastructure (OCI) revenue is growing 66% year over year (YOY), and its backlog has exploded to over $523 billion on the back of massive AI contracts with Meta Platforms, Nvidia, and OpenAI. OCI is now the fastest-growing major cloud platform, beating Amazon Web Services and Microsoft's Azure.
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Oracle needs a lot to go just right
The problem is that the company is betting the farm, so to speak. It's taking on tens of billions in debt and considering the sale of profitable business units to fund the data center buildout needed to serve its AI customers and collect on that massive backlog.
If all goes well, the bet will pay handsomely and leave Oracle as a dominant player in the industry. If it doesn't, the company could be in dire straits financially, and the stock would be in the proverbial tank.
Image source: Getty Images.
The verdict
If you ask me, there's plenty of reason to believe that it won't play out how the bulls hope. The vast majority of that backlog is supposed to come from OpenAI, a company with financial commitments that absolutely dwarf even its top-line revenue, let alone its net income, which happens to be deeply negative.
That's not a risk-reward profile I like. Oracle is not a stock I would own at this point.
Should you buy stock in Oracle right now?
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
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