In Thursday morning trade, watch out for Oracle (ORCL). Last night, the database software giant reported quarterly results, beating expectations. But its plans to raise yet another $20 billion spooked investors.
ORCL stock might open down by around 10%. In the last quarter, revenue grew by 21% Y/Y to $19.18 billion. EPS of $2.03 beat expectations of $1.96. Investors did not like the company’s forecast of raising $40 billion through debt and equity financing. That will add to the $43 billion of debt and $5 billion in equity it has already raised.
The capital expenditure of $55.7 billion, up by 162%, is a required cost to keep its AI infrastructure up-to-date. If SpaceX’s (SPCX) AI hardware rental gave the firm meaningful revenue, Oracle needs to do the same.
On Wednesday, Super Micro (SMCI) lost 27.98%. This erases gains made since mid-May. Just as Oracle announced an equity raise plan, SMCI did the same. It will sell equity and equity-linked financing that will raise $7 billion. SMCI needs the funds to complete purchase orders for AI servers. This will dilute existing shareholders.
Investors who sold SMCI stock and bought Dell Technologies (DELL) or HP Inc. (HPQ) might sleep better at night. Similarly, Lenovo (LNVGY), which gained 145% YTD, has fewer risks than SMCI. Still, all of the AI server suppliers face the same risk: as customers realize that AI token costs keep rising, it will not save the firm money. That would hurt AI chatbot demand.
