Jim Chanos Questions Oracle’s $300 Billion Deal with OpenAI
Famed short-seller Jim Chanos has raised serious concerns regarding Oracle Corp.‘s (ORCL) substantial new backlog, particularly focusing on a $300 billion agreement with OpenAI. Chanos argues that the deal is fraught with risk, as it will not commence until 2027, drawing parallels with Oracle’s previous accounting controversies.
Chanos Critiques Oracle’s Accounting Practices
In a series of posts on social media platform X, Chanos aimed to temper the investor enthusiasm that has propelled Oracle’s stock price this week. He referenced past criticisms of the company’s accounting methods, remarking, “Well, it’s not like $ORCL has been credibly accused of accounting ‘issues’ recently,” a sarcastic nod to a 2016 whistleblower lawsuit. This suit raised significant questions about Oracle’s cloud accounting practices, alleging that the company exerted undue pressure on customers to adopt its cloud products.
As Oracle’s stock experiences a remarkable surge, Chanos’s skepticism emphasizes caution. He highlighted the five-year, $300 billion contract with OpenAI, which represents a significant portion of Oracle’s projected future revenue. “Even better, this $300B deal doesn’t even begin until…2027!” he stated, framing the agreement as a gamble. Chanos questioned the feasibility of OpenAI, a startup with approximately $10 billion in annual revenue, committing to an average of $60 billion per year under this contract.
Market Reactions and Stock Performance
Chanos’s critique arrives as Oracle’s stock has seen a significant rally, despite narrowly missing first-quarter revenue and earnings estimates. The excitement surrounding the stock has largely been fueled by a staggering 359% increase in Oracle’s Remaining Performance Obligations (RPO), which has swelled to an impressive $455 billion.
According to Benzinga’s Edge Stock Rankings, Oracle’s shares maintain a relatively strong price trend across short, medium, and long terms. However, the growth ranking is moderate, sitting at the 66.03 percentile. In the broader market context, the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 and Nasdaq 100 indices, respectively, showed positive movement in premarket trading, with SPY rising 0.21% to $653.57 and QQQ climbing 0.28% to $582.33, according to Benzinga Pro data.
As the debate over Oracle’s practices continues, the implications of Jim Chanos’s remarks may influence investor sentiment and stock performance in the coming months.
