To The Moon

Recently, US stocks that are remotely AI-related have taken a significant beating.

This has been driven by a combination of factors, primarily centered on:

• Concerns over frothy valuations.

• Fear of an "AI bubble" bursting.

Actually, as early as 12 Jan 2025, a Motley Fool post by James Brumley titled “Nvidia Became One of the Largest Companies by Market Cap in 2024. Will Its Reign Continue in 2025?”, questioned AI chip leader - $NVIDIA(NVDA)$’s high trading multiples:

• Of more than 50x its current profit.

• Of more than over 30x its estimated 2026 profit.

The early warnings have largely been “ignored” simply because there is money to be made; not to mention NVDA CEO Jensen Huang active engagement with David Sacks, who serves as White House AI and Crypto Czar in Trump's administration, since 20 Jan 2025.

If you have read the recent post on David Sacks by The NY Times, you would have had a glimpse into business mixing with politics; raising questions on ethics and personal gains.

Then in November 2025, the “concerns” exploded, thanks in parts to Michael Burry’s short positions over NVDA and $Palantir Technologies Inc.(PLTR)$.

Burry’s “put” options filing revealed a major directional bet against the AI trade.

The famed investor argued that AI boom was a glorious “folly" and pointing to specific accounting concerns:

• Circular financing among big tech companies (eg, one company invests in an AI lab, which then buys that company's chips).

• Practice of depreciating AI hardware over unrealistically long periods, which artificially inflates reported earnings for major players like $Oracle(ORCL)$ and $Meta Platforms, Inc.(META)$.

And just like that comeback kid ORCL came under microscopic scrutiny.

On Wed, 10 Dec 2025, hell break loose when ORCL reported its quarterly earnings.

Quarterly Earnings

Revenue:

• Came in at $16.06 billion vs analysts’ consensus of $16.19 billion, missing by -0.8%.

• It missed expectation as legacy software license sales dropped by -3% as customers shifted to its cloud-based services.

• Most posts that covered ORCL’s quarterly earnings did not highlight that ORCL’s cloud has lower profit margins than its legacy software. This will weight on adjusted operating margin, which has declined from 43.4% (2024) to 41.9% in Q2 2025.

Is it fair to conclude ORCL isn't growing ‘organically’, but migrating its on-premise clients to the cloud and revenue will continue to drop as more clients migrate to cloud?

Earnings per share (adjusted):

• Came in at $2.26 per share vs market expectations of $1.64 per share, a significant beat of +38.65%.

• Note : The gains were not 100% operational. It was boosted significantly by a $2.7 billion pre-tax gain from ORCL sale of its interest in Ampere (chip company).

Record AI Backlog (RPO):

• Total Remaining Performance Obligations (RPO), value of contracted future revenue, primarily driven by AI deals has soared +438% YoY to a record $523 billion.

• Analysts and investors were quick to foresee that the massive RPO requires ORCL to spend billions on building AI data centers.

• That fuels investors’ concerns over ORCL’s significant debt load and sustained pressure on Free Cash Flow (FCF).

• The concerns are valid given the volatility hovering all things AI-related now.

$Microsoft(MSFT)$ CEO Satya Nadella's recent comments during his high-profile visit to India in early December 2025 best summed up the reality of AI sentiments:

• Rapid and broad AI adoption, not invention will determine the winners of the global tech race, urging companies to implement AI as a complete, learning system with a "humans-in-the-loop" approach.

• MSFT is aggressively positioning itself as the key enabler of this strategy by investing heavily in global AI infrastructure (like its $17.5 billion pledge in India) and driving adoption through its integrated Copilot and agentic AI tools across its massive enterprise customer base.

The reality is actual take up is much lower than projections due to resistance at the human level.

The Fall.

ORCL's stock has pulled back recently, after a big run-up in the wake of its September 2025 earnings report.

This comes amid worries about an AI bubble and its reliance on a few big customers in the AI space.

ORCL's shoutout to heavy AI spender Meta did not soothe those concerns, and NVDA’s commitment, a big supplier of ORCL's chips, could underscore worries about circular deals.

On Wed, 10 Dec 2025, after earnings results were released, ORCL fell in extended trading, suggesting the latest results weren't enough to alleviate those concerns.

On Wed, 10 Dec 2025, after the earnings report, ORCL fell further, proving investors were still worried. The stock is now down about -35% from its peak in September 2025. (see below)

• The stock is still up around +33% YTD.

• Still, it pales in comparison to its +100% YTD gain in September 2025, granted that there are still about 3 weeks to go before end 2025

Next Quarter Earnings Guidance.

It did not help that ORCL current quarter’s adjusted earnings (per share) is between $1.70 - $1.74, in line with analysts’ estimates only, not exceed.

Though its current quarter revenue growth forecast of 19% - 21% is above projections.

ORCL's AI Dilemma.

ORCL is caught in a no-win situation.

It has to ram up investment in AI data centre for not just its current on-premise to migrate over to. But also because of the OpenAI contract and the related Project Stargate.

It has to ram up AI data centres investment to manage two objectives:

• Migrating its clients to cloud.

• Support the massive OpenAI contract and Project Stargate.

Its massive capital expenditure (CapEx) will hit its balance sheet hard. If it does not spend, it will not be able to fulfill its contract obligations.

To fund this, Oracle might resort to debt financing secured by its large backlog, while using (a) leasing arrangements and (b) customer-supplied chips (BYOC) to manage and reduce the immediate cash outflow.

All above high-risk options are taking place simultaneously. Is it any wonder that market and investors alike are concerned? Has ORCL bitten off more than it could chew ?

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