Episode summary
Oracle Falls Most in Six Months on Mounting Data Center Costs | Bloomberg Intelligence
Bloomberg Intelligence
· · 15 min · Hosts: Paul Sweeney, Scarlet Fu · Guests: Anurag Rana, George Ferguson, Lily Meier
Summary
Oracle’s stock fell after quarterly capital spending came in above estimates, and the discussion centered on whether the company’s AI data-center buildout is becoming too capital intensive. The analyst argued that the market is starting to worry about dilution and financing needs, with Oracle likely to raise at least $20 billion next year and total capex now running far above the old 10-15 billion range. He said the software market is splitting into two groups: AI infrastructure names that are benefiting from heavy investment, and traditional software companies that face slower capex but a different threat from AI disruption.
The second segment focused on SpaceX’s IPO, which is being described as potentially the largest ever and is drawing massive retail demand. The analyst said investors are treating the deal as a long-term bet on Elon Musk’s AI and space connectivity vision, with valuation largely being built off revenue rather than earnings. He also said the company will likely need more equity later because its businesses are not yet generating enough cash to fund the investment cycle.
The final segment on Nike framed Elliott Hill as a restoration chief rather than a reinvention CEO. The reporter said Nike is still down 45% under Hill, with North America improving but Greater China remaining a major challenge. She said product execution, including World Cup jersey issues, and the shift back toward sport and athlete endorsements are central to Hill’s turnaround effort.
Key takeaways
- Oracle’s higher-than-expected capex hit the stock because investors are now focused on data-center financing, not just AI demand.
- The analyst said Oracle may need at least $20 billion of new capital next year, with dilution likely to rise.
- SpaceX’s IPO is being valued mainly on revenue, with the AI business seen as loss-making for at least the next couple years.
- The analyst said SpaceX will probably need more equity financing because current businesses do not generate enough cash for the investment cycle.
- Nike is still down 45% under Elliott Hill, with Greater China and big sports-moment execution remaining key problems.
Notable quotes
“there isn't unlimited capital in the world”
“we are talking about 70 billion and north of that”
“the AI business will be heavy in the investment phase and so you're just not going to see profitability in that business”
“I feel like they're going to have to come back to the equity markets”
“while he's been in the role, the stock is down now 45% and he's really focused on getting the company back to sport”
How the episode opens
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I thought the story for tech companies, if you spend capex, that's a good thing. Um, — Once upon a time it was.
Yeah, I I don't know, but I guess things have changed a little bit. Oracle Oracle Corp. shares declined in pre-market trading after the company reported quarterly capital expenses that were higher than estimates and it's boom.
Uh, it's trading down 10.9% here today. I mean, this is a big company. It's got a half a trillion dollar market cap.
So, I mean, we're talking some real money here. Honor Rana, he can explain this to us. He's a technology analyst at Bloomberg Intelligence.
Honor, what's going on with Oracle today? What did the market not like? I think one of the things you have to think about it is there isn't unlimited capital in the world.
Frankly, I know this everybody is funding data centers, but one of the things Oracle is also doing is when it's going to raise capital next year or even this year, it's going to do some equity offering and it's going to do some debt offering. So, it looks like next year there's going to be more equity dilution by raising the by them raising at least $20 billion. It's going to be most likely more than that.
And I think that is something that everybody needs to grapple with because um we understand there is infinite demand but we don't know if there's infinite demand for capital also at this point.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oracle data center costs
- ai infrastructure profitability
- spacex ipo demand
- nike stock slump
- retail stock trends
Companies and tickers mentioned
- ORCL
- NKE
- Oracle
- SpaceX
- Nike
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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