Oracle’s partnership with OpenAI poses significant risks, as highlighted by analysts who point to OpenAI’s potential financial struggles. Currently, OpenAI is reportedly losing around $12 billion per quarter, raising concerns about its ability to pay Oracle, especially given that Oracle heavily invests in data centers for OpenAI. Investors must carefully assess Oracle’s long-term potential in AI against short-term balance sheet risks. While Oracle shows earnings growth, much of it stems from a one-time sale of a SoftBank venture, suggesting that its core operating income is growing at a stable yet unremarkable rate of 12-15%. Furthermore, Oracle’s increasing capital expenditures—rising from $6 billion to $20 billion—are impacting credit spreads, complicating its financial outlook. For potential investors, understanding these dynamics is crucial for evaluating Oracle’s position in the AI landscape and associated risks effectively.
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