Oracle (NYSE:ORCL) Falls After xAI Deal Failure
2 mins read

Oracle (NYSE:ORCL) Falls After xAI Deal Failure

Bad news for Oracle (NYSE:ORCL) investors as a highly anticipated deal with xAI fell through. With a deal to supply servers to Elon Musk’s artificial intelligence (AI) startup off the table, investors were left behind. The stock fell nearly 3% in the final minutes of Tuesday’s trading session.

In fact, there is already a deal between the two companies, but the talks were aimed at expanding that agreement to provide more services. Reports noted that the current deal involves Oracle leasing AI chips for xAI, which would eventually be used in an upcoming supercomputer. The deal would be valued at around $10 billion if all goes according to expectations.

However, new reports say xAI is buying its own chips, which it will then use to build a data center. An early xAI effort, Grok 2, trained on about 24,000 of these chips from Oracle, but the chips will now come from other sources. Musk himself has noted that “…when our fate depends on being the fastest by far, we need to have our hands on the wheel, not be a backseat driver.”

There may be other possibilities

While this is certainly a blow to Oracle, it’s not the time to lament it. New reports suggest that Oracle may have a new lease on life ahead of it. For one, it’s no longer too concerned about TikTok’s woes, having already bounced back from the problems that surfaced about a month ago. This revival suggests that Oracle is now out of trouble when it comes to all things TikTok.

Meanwhile, Oracle has been awarded a new £10m contract by Birmingham City Council following a “disastrous” implementation of Oracle’s enterprise resource planning (ERP) systems. Apparently, the implementation was so bad that the council failed to “…implement security and audit features in the software”, rendering any fraud from April 2022 to September 2023 largely untraceable.

Is it worth buying or selling Oracle?

Turning to Wall Street, analysts have a Moderate Buy consensus on ORCL stock based on 14 Buys and 13 Holds assigned over the past three months, as shown in the chart below. Following a 25.04% share price gain over the past year, ORCL’s average price target of $149.35 per share implies a 6.16% upside potential.

Oracle (NYSE:ORCL) Falls After xAI Deal Failure