Nabil Sifo @NabilSifo: "𝐓𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐨𝐧 𝐓𝐡𝐞 𝟑𝟎𝟎 𝐁𝐢𝐥𝐥𝐢𝐨𝐧..."

Germany

𝐓𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐨𝐧 𝐓𝐡𝐞 𝟑𝟎𝟎 𝐁𝐢𝐥𝐥𝐢𝐨𝐧 𝐃𝐞𝐚𝐥 𝐁𝐞𝐭𝐰𝐞𝐞𝐧 𝐎𝐩𝐞𝐧𝐀𝐈 & 𝐎𝐫𝐚𝐜𝐥𝐞 𝐒𝐡𝐨𝐫𝐭 𝐦𝐞𝐬𝐬𝐚𝐠𝐞 𝐭𝐨 𝐦𝐲 𝐜𝐨𝐩𝐢𝐞𝐫𝐬 𝐟𝐢𝐫𝐬𝐭: For those who prefer fewer posts, portfolio updates will be titeled “Portfolio Update,” while opinion posts will start with “Thoughts On” and use a blue/black theme for easy recognition. If you’d rather skip opinion posts, you can simply ignore those. Dear Copiers and Followers: Last Wednesday, $ORCL (Oracle Corporation) surged as much as 41.3% before ending the week with a 30.52% gain. This rally fueled positive sentiment across all AI infrastructure, with the $NSDQ100 up 0.5% and the $SPX500 up 0.4% that day. The move followed Oracle’s stellar earnings report and an upgraded growth outlook. The most notable number was the 359% YoY jump in RPO (Remaining Performance Obligations). The huge future earnings are largely attributed to a deal signed between OpenAI and Oracle. The deal includes OpenAI paying Oracle 60 billion dollars annually for five consecutive years starting in 2027. In return, Oracle will provide OpenAI with 4.5 gigawatts of computing power for model training. So far, so good. Investors got excited about those numbers, and capital was pouring into $ORCL . 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐕𝐢𝐞𝐰: Oracle currently has only 1.2 gigawatts of data center capacity. To bridge the gap between the 1.2 GW and the promised 4.5 GW, Oracle will have to invest more than 36 billion to build new data centers (the higher CapEx estimates reach 45 billion). What gets me alerted is that Oracle has 88 billion in debt and 20 billion in operating cash flow. This means Oracle will have to finance almost 60% of its needed CapEx with debt ....... a lot of it. OpenAI, on the other side of the contract, generates 10 billion a year less than one fifth of what they will owe Oracle annually. Although there are projections that OpenAI’s revenue will hit 125 billion by 2029 (the year they have to start paying Oracle), that forecast is highly ambitious. As Oracle will have to finance the new data center with debt, which they already have a lot of, the risk attached to this deal is very high, almost a gamble. After digesting those numbers, investors started to realize the risk, and the stock price fell. 𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲: Betting on future hyper growth is a risky investment, yet I make such investments seeking the high attached reward. However, leveraging debt to invest in such high risk/reward opportunities makes the game even riskier. For me, I am not invested in Oracle and am not planning to open a position in this stock, as the high risk does not justify the reward. Best Regards, Nabil Sifo I am a professional risk modeler and an Associate Member of the Chartered Institute for Securities & Investment (CISI), London. All posts reflect my personal opinions only and do not constitute, nor should they be interpreted as, financial advice or a recommendation to buy or sell any securities. 𝐑𝐢𝐬𝐤 𝐖𝐚𝐫𝐧𝐢𝐧𝐠𝐬: Copy Trading does not amount to investment advice | Your capital is at risk | Past performance is not indicative of future results.

3 Mentioned

ORCL

Oracle Corporation

NSDQ100

SPX500

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