It’s a rough time to be an Ellison-run company.
What happened: Shares in Oracle fell yesterday after the Financial Times reported that its largest data centre partner, Blue Owl Capital, had backed out of talks to fund a US$10 billion AI data centre in Michigan. Blue Owl was scared by Oracle’s debt and high AI spending.
Oracle disputed the report, pulling the old ‘actually, we broke up with them’ — saying that it selected the best equity partner, “which in this instance was not Blue Owl.”
Big picture: Oracle shares have cratered by 45.7% from their all-time high in September. And, after a revenue miss, investors have grown wary of Oracle’s spending commitments ($248 billion on data centre leases alone over the next 15 to 19 years), versus what it’s bringing in.
A Wall Street Journal piece highlighted Oracle’s remaining performance obligations; basically, future sales that are probable but haven't happened yet. Oracle had $523 billion worth of RPOs as of last month, with concern growing that some of these sales might be less than probable.
Zoom out: Oracle is not the only AI canary in the coal mine. CoreWeave, whose business model is predicated on simply owning a bunch of Nvidia chips, has fallen 22.3% over the past five days on similar concerns about debt, spending, and delays in data centre construction.
One analyst went so far as to tell the WSJ that CoreWeave has the “ugliest balance sheet in technology, by far.”
Why it matters: As the AI bubble debate rages on, these stock slips are a real expression of investor fear that many big ticket commitments will never actually materialize as real sales.—QH