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A prominent technology analyst criticized this oracle company‘s ( NYSE:ORCL ) high-profile AI strategy has been labeled as a “bad practice” and an “irresponsible investment” that relies on speculative demand, as opposed to a “sound” and established customer-driven AI build. Microsoft Corporation (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), and Alphabet Co., Ltd.(NASDAQ:GOOG) (NASDAQ:GOOGL) Google.
Gil LuriaIn a conversation with CNBC, DA Davidson’s head of technology research claimed that Oracle was “borrowing to provide capabilities to startups” and argued that this was a risky move.
He directly contrasted this with “big tech” rivals that “have all the customers, they have the cash on hand” and are building data centers on demand that “were already selling three years ago.”
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Luria’s sharpest criticism was directed at the economics of Oracle’s new AI business, which he called “a bad business with very low profit margins.” He noted that even though Oracle’s core business has gross margins of 80%, the company is touting 30% to 40% gross margins on new AI deals “as if that’s a good thing.”
At the center of the skepticism is Oracle’s massive $455 billion backlog.
Mr. Luria called the reported transactions: OpenAI“false promises” instead of “real demand.”
He argued that OpenAI “has no intention of meeting such obligations” and views the effort as a “flexible arrangement” to consume capacity as needed.
This analysis is further complicated by revelations from well-known short sellers. Jim KanosHe noted that the core $300 billion OpenAI contract is not scheduled to begin until 2027, and questioned how the startup could realistically fund a $60 billion annual contract.
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Meanwhile, CNBC Jim Cramer He attributed Oracle’s massive $455 billion backlog to its “Stargate” AI infrastructure project, saying, “Who else would place an order like that?”
“Everything they say from now on should be taken with a bit of a grain of salt,” Luria concluded, adding that the recent AI-driven $100 rally in Oracle stock “has completely disappeared” and that “it makes a lot of sense.”
ORCL has returned 36.72% year-to-date while the S&P 500 has returned 16.74%. Shares closed 3.88% lower at $226.99 on Wednesday and were down 0.22% in pre-market trading on Thursday. It increased by 19.70% for the year.
Although it maintains a stronger price trend in the long term, it has a weaker trend in the medium to long term, resulting in a lower value ranking. Additional performance details include: Benzinga Gaz Edge stock rankingavailable here.
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The article Top Analysts Say Oracle’s ‘Irresponsible’ AI Bets Are Different from ‘Healthy’ Microsoft and Google Demands: ‘Bad Business’ with ‘Very Low Margins’ was originally published on benzinga.com.
