Well, what did they think was gonna happen? Seriously. Another Tuesday, another dose of corporate reality slapping investors right in the face. Oracle’s stock took a nice little tumble, down 3.5% to $197.03. Why Oracle Stock Sank Today - The Motley Fool And why? Because some analyst, Gil Luria over at DA Davidson, Here are Tuesday's biggest analyst calls: Nvidia, Apple, Tesla, Microsoft, Oracle, Live Nation, Coinbase & more - CNBC finally decided to call a spade a spade, slashing Oracle’s price target by a whopping 33%. Thirty-three percent, folks. That ain't just a haircut; that's a full-blown scalp job.
For months, we’ve been hearing this song and dance about Oracle and OpenAI, this massive, game-changing $300 billion, 5-year contract that was supposed to turn Oracle into some kind of AI infrastructure titan. I warned you then, when the stock was floating around $328 a share, that it felt like a house of cards built on unicorn farts. And lo and behold, here we are. The market cap's still a staggering $562 billion, but the cracks? They’re showing.
The OpenAI Bait-and-Switch (Or Just Bad Math?)
Let's be real. The moment Oracle announced that almost the entire increase in their backlog was thanks to OpenAI, alarm bells should've been ringing so loud they’d shatter windows on Wall Street. It was like they caught a fish, but it turned out to be the only fish in the damn pond, and it was mostly bones. Gil Luria, bless his soul, put it bluntly: he thinks OpenAI isn't a "serious counterpart" and Oracle was basically a "pawn."
A pawn. Think about that for a second. Oracle, a tech giant, reduced to a piece on someone else's chessboard. It’s like buying a ticket to the Super Bowl, only to find out your job is to sell hot dogs in the nosebleeds while the real action happens somewhere else. OpenAI, meanwhile, goes around announcing they’re signing over a trillion dollars in AI data center contracts with everyone and their grandma. A trillion! Suddenly, Oracle’s $300 billion, while still a huge number, looks like pocket change in a much, much bigger game. It makes you wonder, offcourse, if Oracle was just the flashy first name they could trot out to get some hype before moving onto the serious players.
Who’s getting played here? Oracle, for sure. But more importantly, the investors who bought into this fairy tale. They expect us to believe this nonsense, and honestly... it’s a tough pill to swallow when you see the numbers.
Deja Vu All Over Again: Valuation Nation
I've been screaming about Oracle’s valuation for a while now. When the OpenAI contract first dropped, pushing the stock through the roof, I was saying it was too rich for my blood. And what did we see yesterday? The stock’s day's range was $185.63 - $199.41. A far cry from those heady $345 highs.
Luria's not just making this up, either. He's looking at the same numbers I am. Oracle's trading at 46 times earnings. Forty-six! And their forecast growth rate, even including the OpenAI revenue, is only 23%. That gives you a PEG ratio of 2.0. For the uninitiated, that's a red flag waving like a maniac at a bullfight for any self-respecting value investor. It’s a valuation that screams "future growth is already priced in, plus a generous dollop of pure fantasy." This isn't just about a bad day. No, 'bad' doesn't cover it—this is a brutal reminder that hype ain't a sustainable business model.
Luria’s warning echoes mine: if those OpenAI orders don't materialize, or if they're just not as profitable as everyone hoped, Oracle is a clear "sell." And let's face it, the tea leaves are starting to look pretty murky on that front. The gross margin is 66.10%, which is decent, but a 0.96% dividend yield ain't gonna save you when the stock's taking a dive. Then again, maybe I'm the crazy one here. Maybe everyone else is seeing something I'm missing, some magical AI pixie dust that justifies these numbers. But I don't think so. I think we’re watching the slow, inevitable deflation of another overhyped tech narrative.
The Emperor Has No AI Clothes
So, here we are. Oracle’s stock slides, an analyst drops a truth bomb, and the rosy picture of their AI future starts to look a lot more like a mirage. It's not just a stock correction; it's a cold, hard dose of reality for anyone who bought into the idea that one big, shiny contract could magically transform a legacy tech company into an AI darling overnight. Oracle thought they had a golden ticket; turns out, it might just be a receipt for a very expensive, very public lesson.
