If the AI bubble bursts, will Oracle go under?
In my opinion, it is highly unlikely.
Many people confuse a sharp drop in stock price with company bankruptcy, but in the capital market, these are two completely different things.
If the AI bubble really bursts, it won't be Oracle that breaks first, but those AI companies that have no revenue, no cash flow, and survive solely on financing. Oracle is essentially still a mature enterprise with stable cash flows from databases, enterprise software, cloud services, government clients, etc. AI is merely its new growth engine, not its only pillar.
What truly needs attention is not the stock price, but the fundamentals.
If AI demand begins to cool down, it typically transmits along such a path:
First, customers reduce orders, causing the growth rate of Remaining Performance Obligations (RPO) to slow down or even decline; next, data center utilization drops, and GPUs and servers begin to sit idle; subsequently, companies will cut capital expenditures (CapEx), slowing the construction of new data centers; finally, OCI cloud business revenue growth gradually drops from 70%, 60% to 40%, 30%, 20%. Only when these data deteriorate for several consecutive quarters will the market reprice, often after the company's stock price has already plummeted in advance.
Therefore, stock price is just the result; orders, revenue, and capital expenditure are the true causes.
Many ask why Oracle fell from over $300 to over $100?
In my view, the core issue is not that the company suddenly worsened, but that the market shifted from extreme optimism to extreme caution.
Last year, the market believed AI infrastructure would grow infinitely, making Oracle a hot target due to its OCI cloud and AI data centers, pushing valuations higher. But as capital expenditures grew larger and free cash flow came under pressure, the market began to ponder a more realistic question: When exactly will these investments pay off?
Consequently, valuations began to contract.
This has no direct relation to whether the company is profitable. Suppose a company consistently earns 10 billion RMB annually. When the market is willing to give it a 40x P/E ratio, the market cap is 400 billion RMB; if later it is only willing to give a 20x P/E ratio, despite unchanged profits, the market cap will be halved. The enterprise hasn't worsened; what changed is market expectation.
History has proven this countless times.
During the 2000 internet bubble burst, Cisco dropped 90%, Amazon 95%, Microsoft 60%, and Intel 80%. They didn't go under; the bubbles simply vanished, and valuations returned to normal. What truly disappeared were those companies without business models, without cash flow, relying only on continuous financing.
If the AI bubble bursts in the future, I prefer to watch three indicators rather than staring at K-lines every day.
First, see if OCI revenue growth continues to slow.
Second, see if RPO stops growing or declines.
Third, see if management starts significantly cutting capital expenditures.
As long as these three indicators remain healthy, even a sharp stock price drop might just be market sentiment fluctuation; conversely, if these three indicators deteriorate continuously, even if the stock price remains firm temporarily, one must stay vigilant.
The technical side is the same.
From the current trend, $114.5 has formed a 阶段性 support level, moving averages are starting to arrange in a bullish pattern again, and it has stabilized near $120, with the short-term trend clearly better than before. If it can break through $128 with increased volume, the rally is expected to enter a new upward phase; if it fails to break through, it will likely consolidate between $120 and $128. Since RSI is already high, chasing highs in the short term offers poor risk-reward. More noteworthy is stabilizing around $120 on a pullback, or confirming the trend after breaking through $128 with volume.
Investing in AI infrastructure requires studying not daily point fluctuations, but whether the AI industry chain is still creating real demand.
$Oracle(ORCL.US)
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