Hello reader.
Oracle Corporation (ORCL) Looks like the Fates are Blessed this week.
The stock jumped 13% on Monday and more than 4% on Tuesday, supported by a broader, short-term rally in… Software inventory And a new agreement with Bloom Energy Company (He is)Which led to this stock rising by 22%.
Building on the existing partnership, Oracle has agreed to purchase up to 2.8 GW of fuel cell power from Bloom Energy – in addition to the 1.2 GW already contracted and currently deployed. These fuel cells will support on-site power generation for Oracle data centers and expanding AI infrastructure.
The move is unsurprising and perhaps a no-brainer for Oracle, as it fits perfectly into its larger drive toward artificial intelligence. But investors – and the software company itself – must remember that this progress comes at a high price…
Bloom issued a warrant to Oracle to purchase 3.53 million shares at $113.28 per share. The note is like a coupon giving Oracle the right to buy shares in Bloom Energy at a fixed price. If Oracle uses the memo, it will spend about $400 million in total.
This exorbitant sum is just one example of Oracle’s already massive spending on artificial intelligence. Therefore, investors should also Remember, the cost of Oracle’s spending spree is greater than its payments. It could be the company’s undoing.
Oracle is still well below its previous highs, and the company now has the appearance of upward momentum, or at least significant headlines. This combination may look like an attractive opportunity to buy on the dip.
But I advise caution.
per day Smart moneyI’ll explain why I think Oracle is a risky investment.
Next, I will point you towards more reliable and profitable stocks.
Let’s jump in…
The hidden cost of Oracle’s AI ambition
Oracle has a history of betting its future on huge bets on AI — especially AI infrastructure — that are already draining the company’s finances.
Its balance sheet now carries $120 billion in net debt and lease liabilities. Meanwhile, the company recorded negative free cash flow in fiscal 2025 for the first time since 1990.
Oracle continues to aggressively increase spending and borrowing.
One year ago, the administration directed capital spending — money used to grow a business or maintain existing operations — of $16 billion in fiscal 2026.
Three months later, it raised that guidance to $25 billion.
Then to $35 billion last September…
Then to $50 billion last December.
Meanwhile, the projected profitability of the data center business that Oracle is racing to build is, to put it charitably, disappointing.
Management has steered investors toward gross margins of 30% to 40% for its AI data centers, versus the more than 80% margins Oracle earns from its legacy software business.
But the internal documents he reviewed Information It reveals that Oracle’s AI data center operations generated average gross margins of just 16% — lower than many non-technology retail companies. Walmart Inc. (And die)for example, manages gross margins of about 24%, much higher than Oracle’s AI data center margins.
More worryingly, three-fifths of Oracle’s contracted backlog comes from one customer: OpenAI – a company that, like Popeye Wimpy, “will happily pay you next Tuesday for today’s data center capacity.”
If OpenAI can’t maintain its leadership position and start generating positive cash flow, Oracle faces the prospect of sitting on $248 billion in data center lease obligations that its anchor tenant can no longer fill.
However, as Oracle insiders seek an exit, 40 out of 50 Wall Street analysts tracking the stock rate it a “buy.”
This is the enduring power of “new age” novels in the face of “old school” dangers.
But here’s why I think Wall Street is wrong…
Where the real returns actually hide
During the dot-com bubble, investors placed a great deal of faith in the innovations of technology companies, dazzled by the promise and spectacle the future held. This is similar to what happens today with hyperscalers like Oracle.
And you can see the magic in the sector valuations.
At its peak in March 2000, the technology-focused Nasdaq 100 was trading at 81 times earnings! Within one year of that peak, the Nasdaq 100 fell more than 70%, and it would remain a losing investment for the next 15 years.
On the other hand, an investor who paid that peak price in March 2000 and held it until 2024 would have made gains of approximately 414%, or 6.9% per year.
This isn’t a terribly bad result over the long term, but as the chart below shows, many other sectors — specifically non-technology or traditional sectors — achieved results over this time frame that were more than Five times larger. Even gold has outperformed the Nasdaq 100, rising more than 800% since March 2000.
These are the same overlooked sectors that have the potential to maximize your gains today.
In contrast to Oracle, which is pouring billions into AI infrastructure with uncertain near-term returns, many “old school” plays like commodity stocks are tied to real-world demand. Of course, these sectors are not risk-free, but their value depends less on long-term technological bets.
I’m talking about consumer cyclicals, healthcare, energy, and… Gold stocks – an opportunity I just discussed on Monday Smart money.
As was the case in the dot-com era, today’s market is defined by high-risk, high-spending technology leaders – while traditional sectors quietly offer stability and real profits.
I recommend these types of strong plays in our site Fry investment report Wallet, like…
- An independent energy exploration and production company has achieved a 41% gain in three months.
- And my most recent recommendation, the medical device company, which I recommended last Friday. The company follows up with this week’s announcement of its latest analytical tools.
Each of these companies has a lot of potential in the future.
While Oracle remains critical to the development of AI, its reliance on a single, capital-intensive growth engine like AI also exposes the stock to greater risks, making any misstep likely to have a significant impact. That’s why I recommended it to readers He sells Stocks in November. It has declined by 20% since then.
For more information on which stocks I think will drag down your portfolio and which can boost it, I recommend watching my video Sell this, buy that broadcast.
In my presentation, I talk more about the advantages of sticking with undervalued companies that are quietly driving innovation, and why companies that dominate the headlines — like Oracle — may tempt fate rather than master it.
It is considered,
Eric Fry
