CLSA Starts Oracle With Hold on AI Debt Concerns - Yahoo Finance

What the report says

Yahoo Finance, carrying an article that it said first appeared on GuruFocus, reported that brokerage CLSA initiated coverage of Oracle with a Hold rating, citing concerns over how the software and cloud company will finance its artificial intelligence buildout. The report said CLSA analyst Bhavtosh Vajpayee expects Oracle may need as much as $500 billion in financing by 2030 to support its AI infrastructure plans.

According to the report, CLSA believes Oracle can fund only part of that expansion from internal resources, which could leave the company depending more heavily on borrowing. The article cited Oracle’s total debt at $167.4 billion for the quarter and a debt-to-equity ratio of 4.46, figures that CLSA said could increase the company’s exposure to shifts in funding costs, execution risks and demand for AI cloud services.

CLSA set a $145 price target for Oracle, based on 18 times the firm’s fiscal 2028 GAAP earnings estimate, the report said. While Oracle is seeing momentum in AI cloud infrastructure through customers and partnerships, CLSA’s view is that the investment case depends heavily on whether the company can finance expansion efficiently while competing with larger cloud providers.

The development matters because major technology companies are spending heavily to support AI computing demand, and investors are scrutinizing whether growth in cloud revenue can justify rising capital needs. Based on the Yahoo Finance/GuruFocus report, Oracle’s debt load, capital spending plans and AI cloud revenue growth are likely to remain central issues for shareholders.