Bull v. Bear: ORCL Issues 'Force Majeure' for Project Jupiter Data Center Plan

SPEAKER_1 (0:00)

Welcome back to Fast Marketing here on Schwab Network. Oracle is making moves to protect itself from potentially rising cost tide to a massive New Mexico data center. That's according to Bloomberg. The company issued a force majeure notice to the project's developer Blue Owl as regulatory setbacks threaten its planned 2028 opening. A force majeure essentially means an event that's well beyond the company's control that could prevent it from meeting a contract. Shares of Oracle are under pressure in response. The company is not abandoning the site. It is simply seeking flexibility to delay payments if the project can't come online as scheduled. Keep in mind the facility is considered a key piece of the Stargate AI build out. Oracle says that Project Jupiter remains on schedule. All right. Time now for the tug of war on Oracle. For that, let's welcome back in our co-host, Tom White and Kevin Hincks. It is Bull versus Bear time. So guys, before we get to your example trades, we've got to get each of your thoughts on Oracle. I'll start with you, Kevin, your take.

Kevin Hincks (0:58)

Yeah, and by the way, just to help out, breaking news, US and Iran explore phased Hormuz deal. That's why the market is rallying right now. But getting to Oracle, raise your hand if you had to look up Force Magère today. I did. I had to see what it was. It basically allows one side or another to get out of this deal, and Oracle's comment afterward, because the stock sold off hard on this news, this is commonplace in developments of this scale.

They think it's basically normal business and contract law to do one of these. But this is still a company that has great, incredible exposure to AI like the RPO at 664 billion. But the question that haunts Oracle and this news today didn't help is, can they deliver on all these goods, and can the people asking for them come through with everything they need to get these deals done? Does the 664 billion actually ever show up? Those are the doubts around everything that's going on in Oracle right now. If they deliver, if all this comes to fruition, this stock is massively undervalued. Right now, there's uncertainty all over this company. Diane.

SPEAKER_1 (2:25)

Tom, your take on Oracle.

Tom White (2:26)

Yeah, I'm in Kevin's boat here. I had to kind of look at this deal, where they're going to have to start paying Blue Owl, and that's why Blue Owl was down also. But they invoke the force majeure clause to protect itself from paying for the massive AI data center in New Mexico if the project got delayed by factors outside of its control and act of God type of escape hatch that they're using here. And this is based on the natural gas pipeline that they need to power this Project Jupiter that they have in New Mexico. So this is a big deal. And remember, when this stock hit all-time highs last fall and began falling, everybody's concerned about, yeah, they've got this massive backlog of $664 billion, but how much of it's going to come to fruition? What kind of stumbling blocks are they going to have because their free cash flow and the billions negative over the past couple of quarters, their debt continues to rise, they're down to a triple B minus, the lowest investment grade. Now, what are the good parts? Well, their OCI as far as the AI side of their business, that grew 121% year-over-year last quarter, right? 93% growth on a sequential basis. So there's the positives, but this throws a lot of variables into the bullish theme here for ORCL.

You know, they're taking on a lot of debt.

Are they going to have these partnerships and deals come through where they're going to realize that $664 billion in remaining performance obligations? That's a concern, I think, for investors, and this just throws another wrench into it.

SPEAKER_1 (4:12)

All right, let's get into the example trades. Kevin, let's start out with yours. What's your approach today?

Kevin Hincks (4:17)

Yeah, mine is a bullish trade, but it's also a bearish trade. I'm looking for movement. I don't know which direction it's going to go, but when you get the trade, you'll see what direction I'm leaning, and that is I did an unbalanced long iron condor, which is I'm looking for movement in either direction, but I skewed it in one direction versus the other. Here's the strikes. I went out to October 16th. I gave myself some duration for this to play out.

Then I bought the $145, $155 call vertical, so a $10 wide call vertical. Then I bought the $125, $120 put vertical. So a $5 wide put vertical, $10 wide call vertical. So I've got an opinion, but I'm not sure I'm right. It could go in either direction. That's basically the idea behind a trade like this. Now, this trade loses money if the stock sits right here and doesn't move. So Tom, I paid about $295 for it.