Oracle's OpenAI Deal: Another Corporate Mirage?
Alright, let's just get this out of the way: Oracle stock slid 3.5% today. Oracle’s Stock Dips Amid OpenAI Deal Concerns. Big whoop, right? Just another Tuesday in the market. Except, no. This ain't just another Tuesday. This is a big, flashing neon sign screaming "I TOLD YOU SO" to anyone who bothered to listen. And I did tell you so. Back when Oracle was strutting around like a peacock at $328 a share, flapping its wings about that supposed OpenAI deal, I said it reeked. A mirage, I called it. And now? Well, now we're seeing the shimmering heat haze for what it really is: a whole lot of nothing.
Gil Luria over at DA Davidson finally pulled his head out of... well, let's just say he cut his price target on Oracle by a whopping 33%. Down to $200 a share. And you know what? Even at $194, where it's sitting today, I still think that's generous. This isn't just a stock correction; this feels like the market finally realizing it's been sold a lemon wrapped in a very shiny, AI-powered bow.
The Shell Game of "Customer Commitments"
Remember when Oracle announced that $300 billion, five-year contract with OpenAI? Good times, right? Oracle made it sound like they had a whole parade of customers lining up, practically tripping over themselves to get a slice of that cloud pie. "Several customers represented the increase in [backlog]," they said. Sounded impressive, didn't it? Like Oracle was suddenly the belle of the ball, winning some high-stakes bake-off for AI infrastructure.
Then Luria drops the hammer. Turns out, "several customers" was actually just one customer: OpenAI. Almost the entire damn increase. This isn't just a slight misdirection; this is a magician pulling a rabbit out of a hat and then admitting the rabbit was already in his pocket. It's a classic bait-and-switch, pure and simple. They wanted that juicy stock bump, and they got it, for a while anyway. But when you’re building a house of cards, eventually the wind blows.
And here’s where it gets really rich. Since that big Oracle announcement, OpenAI has gone on to announce over a trillion dollars in other AI data center contracts. A trillion. Suddenly, Oracle's $300 billion, while still a lot of zeroes, looks like pocket change. It makes you wonder, doesn't it? Was Oracle ever really a serious contender, or were they just a convenient prop in OpenAI's grand theater of "fake it 'til you make it"? Were they just the first date before OpenAI went home with the prom queen? I mean, seriously, what kind of due diligence did Oracle do here, or did they just get starry-eyed at the mention of "AI" and "billion"? It's like watching someone get excited about a fancy new car that's still on the drawing board, then finding out the company's already promised a dozen other people the same car.
This whole thing smells like a desperate attempt to pump numbers. I've seen it a hundred times. Companies get a whiff of a hot trend – dot-coms, crypto, now AI – and suddenly every announcement is spun into gold. But the market, eventually, sees through the smoke and mirrors. What happens when these "commitments" don't materialize? Oracle's current valuation, sitting at 46 times earnings, with a forecast growth rate of only 23% (and that includes this flaky OpenAI revenue), is already pushing the envelope for any sane value investor. A PEG ratio of 2.0? Give me a break. That’s not investing; that’s gambling. And if the OpenAI orders evaporate like a puddle in the desert, this stock is going to be a clear sell. No, scratch that – it’s a sell now, if you ask me.
I guess the big question is, who's really getting played here? Is it Oracle, thinking they landed a whale? Is it investors, buying into the hype? Or is it just the standard corporate playbook: announce big, let the stock fly, and then slowly, quietly, let the truth trickle out? Sometimes I wonder if I'm the only one who sees this stuff... or maybe it's just so obvious, everyone else assumes it's part of the plan.
