Larry Ellison has had a bad year. The founder of Oracle (NASDAQ: ORCL | ORCL Price Prediction) has lost $60 billion in net worth this year, which has dropped his total to $187 billion, still a lot of money. The Bloomberg Billionaires list shows that no one on it has done worse. The primary reason for the drop is that Wall St. thinks Oracle has overreached financially, as it chases AI supremacy.
Ellions owns 41% of Oracle. Its stock is down 32% this year, while the S&P 500 is up 9%. It used to be among the 20 most valuable companies in the world. Now it ranks 36th, putting it below Costco.
Oracle invested $55.7 billion in AI data centers in the fiscal year that just ended. It said the future would raise another $70 billion in the fiscal year that has just started. Oracle will have $100 billion in debt on its balance sheet, and that will grow.
Oracle’s planned investment appears to be close to the figures reported by other mega-AI companies like Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT). They are pulling enough cash off the balance sheet that they have, or will, turn to the debt markets.
But there is a difference between Microsoft and Oracle. Oracle had revenue of $19.2 billion in the most recently reported quarter. It had a net income of $4.3 billion. In the most recently reported quarter, Microsoft had revenue of $82.9 billion and net income of $31.8 billion. The difference is stunning.
The reason Oracle’s stock is down and Ellison’s net worth has fallen is that Wall St. does not believe Oracle can keep up with its much larger rivals. Left behind, as AI explodes, how does it prevent being left in the backwater? The answer is that it’s trapped there.
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