One To Keep An Eye Out For
The U.S. administration has kicked around the idea of Oracle (ORCL) chairman Larry Ellison as a possible buyer to one of the hottest social media assets TikTok.
Oracle isn’t intending to outright acquire a majority stake, but their involvement shows that Oracle is at the seat with the big boys in tech and that seat carries a great deal of clout today.
Remember that Oracle’s stock was dead as a doornail a few years ago.
But the AI revolution seemingly revived a slumbering stock jolting it to higher highs.
Before that AI boom, Oracle was known as the company with outdated database cloud software and even today, most people don’t know what they even do.
Oh, how do just a few years change everything?
Realistically, Oracle likely doesn’t have the cash to buy into the asset.
The company is spending much of its cash on building new AI data centers and has over $90 billion in debt, partly due to a prior acquisition. Plus, the infrastructure-focused company has little experience running a consumer-oriented app.
The likelier scenario, and the one that’s under consideration with Trump administration officials, would involve Oracle reprising its role in providing a security backstop for US users’ data backstop would guarantee that TikTok’s US operations under new ownership would not contain a back door that China’s government could exploit.
Under a prior arrangement, the cloud giant would have taken a minority ownership stake in TikTok’s global business and provided technology and data storage services for the app to protect US user data.
But the arrangement hit a snag when officials in Washington and Beijing disagreed over whether ByteDance would maintain any involvement in the new TikTok entity.
The second challenge is more technical. Chinese authorities are unlikely to approve a deal that involves selling the new buyer TikTok’s valuable content algorithm, which determines the posts that users see in their feeds.
We are still trying to analyze where the dust will settle because it is not clear to the outside lens.
As it stands, Oracle pouring capital into AI data centers is a strategic move that has benefited the stock price and there is a high chance that shareholders start to bid up the stock after the macro contagion passes.
If somehow Oracle can even finagle a massive contract to managing TikTok’s data, I do believe the stock will be up 12-15% on that news. That development isn’t in the price yet and investors haven’t been sniffing it out yet.
In short, there is a great deal of upside potential in Oracle’s share price and outsiders shouldn’t minimize or water down the possibility for a short-term short squeeze of monumental proportions.
At the very minimum, it is hard to bet against Oracle even if the stock is down YTD by 8% and investors should expect some sort of appreciation when the broader landscape settles down.
