$ORCL's AI Bet Could Become a Debt Trap
The most entertaining outcome...
$Oracle(ORCL)$ continues to nosedive, making it prohibitive to fund insane capex over the next 3 years.
Without AI growth, Oracle's stock enters a downward spiral.
The falling stock price forces Ellison to either liquidate some of his stake to fund the personal guarantee of Paramount's debt or let Paramount default and figure it out later.
Paramount goes back up for auction in 2029/2030 after defaulting on its debt.
How one of the most successful businessmen of all time went from a FCF machine to being beholden to debtholders is beyond me.
This is a canary.
If bond yields keep rising for
ORCL and neoclouds it destroys the business model.
$500 billion in RPO is dependent on being able to fund the project with debt and equity. Can’t do that? RPO doesn’t matter!
I keep comparing these stocks to SunEdison because the models is exactly the same. It’ll work until the day it doesn’t and then 💥
PS：The stock market is in a strange place where profitable, steady compounding (15%+) companies are getting no love.
And companies growing revenue fueled by debt and uncertain profit outcomes are becoming 🚀.
Feels unstable...but we'll see.
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