Updated

Updated · Business Insider · Jun 19

Essaye Warns 10x-24x AI Valuations Signal Data Center Boom Risk as Oracle Drops 25%

Updated

Updated · Business Insider · Jun 19

Essaye Warns 10x-24x AI Valuations Signal Data Center Boom Risk as Oracle Drops 25%

3 articles · Updated · Business Insider · Jun 19

Forward P/E ratios as low as 10x on AI-linked stocks may reflect investor fear that the data-center buildout will stall, Sevens Report Research founder Tom Essaye said.
Nvidia trades at 21x forward earnings, Micron at 10x, Broadcom at 24x and SanDisk at 14x, versus 21.5 for the S&P 500 — a discount Essaye says signals skepticism about future AI profits.
A pullback in AI adoption or returns could prompt hyperscalers to cancel projects — Essaye cited a scenario of 10 data centers being scrapped — triggering order cuts for chip, memory and networking suppliers.
Oracle's roughly 25% slide since June 1 is one recent sign of that unease, as investors question heavy spending on AI infrastructure.
Essaye said he is not calling a market top, but argued the pattern echoes the dot-com bust, when internet buildouts slowed after profits fell short of expectations.

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Oracle’s $500 Billion AI Investment: Data Center Supercycle, Debt Risks, and Bubble Warnings

Overview

Oracle, OpenAI, and SoftBank announced a massive $500 billion investment in US AI infrastructure with the 'Stargate' project, which, along with a presidential announcement, sent Oracle's stock soaring. This optimism was fueled further by strong quarterly earnings, briefly making Larry Ellison the world's richest person. The AI-driven deals are expected to boost Oracle's cloud revenue significantly by 2030. However, Oracle's bold AI strategy is seen as risky, drawing intense market scrutiny and raising questions about whether these huge investments will deliver the promised returns, especially given Oracle's history of stock volatility during market downturns.

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