Wall Street supports the narrative of "large layoffs in exchange for AI computational power"! Bullish on Oracle Corporation (ORCL.US) for its bold move in reallocating cash flow for data centers.

Database software and cloud computing super giant Oracle Corporation (ORCL.US) is aggressively cutting costs through layoffs to support its grand ambitions in artificial intelligence. This round of layoffs comes against the backdrop of major tech giants, including Oracle Corporation, Microsoft Corporation, and Alphabet Inc. Class C, significantly increasing investments in AI infrastructure. This multinational tech group is seeking to cut thousands of jobs to free up more cash to build artificial intelligence data center infrastructure. According to reports citing sources familiar with the matter, this tech giant has informed its massive workforce of 162,000 employees that the new round of layoffs will affect tens of thousands of employees. Oracle Corporation declined to comment on the latest layoffs. Wall Street analysts suggest that in the long term, layoffs will release cash flow and reallocate more resources from low-return areas to high-growth areas, significantly increasing the company's overall revenue. Investors remain concerned about the company's significant capital expenditures on AI data centers to handle massive AI workloads. Despite a 5% rebound in Oracle Corporation's stock price this week due to easing tensions in the Middle East and GEO Group Inc., the company's stock price has already fallen over 25% this year. The company announced in early February its plan to raise up to $50 billion through a combination of debt and equity by 2026 to significantly expand its already signed contracts for cloud-based AI training/inference computational resources closely related to the immense demand for cloud infrastructure capacity for AI. Key customers include companies such as NVIDIA Corporation, Meta (formerly Facebook), OpenAI, AMD, and xAI. As the demand for AI computational resources for model scale, inference pipelines, and multimodal/agent-based Agentic AI workloads grows exponentially, tech giants are increasingly focusing their capital expenditures on AI computational infrastructure under the narrative of an "AI computational power bull market." Global investors are anchoring this as one of the most certain investment narratives in global markets. Oracle Corporation and other US tech giants are at a turbulent intersection of two unsettling trends in the tech sector. According to institutional compiled analyst expectations, Amazon.com, Inc., along with Alphabet Inc. Class C parent Alphabet, Meta Platforms Inc., Oracle Corporation, and Microsoft Corporation, are expected to collectively spend approximately $650 billion on AI-related capital expenditures by 2026, with some analysts believing the overall expenditure could exceed $700 billion implying a potential growth of over 70% in AI capital spending year over year. It is worth noting that these five major US super tech giants are expected to invest approximately $1.5 trillion from 2023 to 2026 to build immense AI computational infrastructure, compared to approximately $600 billion invested during the entire historical period up to 2022. However, due to these immense AI expenditures significantly reducing these companies' free cash flow and a lack of clear monetization and revenue paths closely related to AI in the short term, investors are increasingly concerned. The growing investment in AI computational infrastructure raises questions about when it will bring significant returns on revenue and profit growth. Additionally, the pessimistic narrative of "AI disrupting everything" has led global investors to continue selling software stocks, including these five tech giants, resulting in continued sluggish stock prices this year, particularly Microsoft Corporation's stock price, which has dropped by 23% in the first quarter of this year, marking its worst quarterly performance since the 2008 financial crisis. Wall Street supports Oracle Corporation's layoffs, emphasizing cost savings opportunities Analysts from the Wall Street financial giant Barclays PLC Sponsored ADR stated in a research report on Tuesday that Oracle Corporation's layoffs would help release strong cash flow in the short to medium term. Financial Institutions, Inc. stated that they continue to give the stock a "Buy" rating, with a target price of $230 for the next 12 months. As of Wednesday's closing price of US stocks, Oracle Corporation's stock closed at $145.23. "Considering Oracle Corporation's existing large-scale restructuring plans for fiscal year 2026 and previous media reports, we do not believe that the layoffs announced now would surprise the market. The market seems to recognize the potential cost savings implicated by these latest initiatives at a time when the company is rapidly expanding its core AI infrastructure capacity, as well as the strong revenue expectations brought about by the AI infrastructure frenzy," analysts from Barclays said. Barclays also emphasized that Oracle Corporation's per capita profit is lower than that of its competitors, and its employee productivity is below average. Barclays analysts' latest forecast data shows that due to limited employee growth compared to other cloud computing giants and significant cost reductions, Oracle Corporation's revenue will grow to at least three times its current level over the next few years. Different from Block's "violent layoffs" driven by AI intelligent agent technology, Oracle Corporation focuses on the AI computational arms race For Oracle Corporation, this large-scale layoff seems more like a way to raise cash flow, stabilize investor sentiment, and improve capital utilization efficiency to keep up with the AI computational arms race, rather than a clear indication that the company has already proven that "AI agent-based workflows can directly replace a large number of employees." Public information shows that while Oracle Corporation is initiating layoffs affecting thousands of people, it is also advancing high-intensity AI infrastructure expansion. The company recently planned to raise up to $50 billion for expansion, and its stock price has fallen significantly by about 29% this year. However, Oracle Corporation has given a very strong stance on the demand for AI computational resources: remaining performance obligations (RPO) have soared by 325% year-over-year to $553 billion, and the company has raised its revenue target for fiscal year 2027 to $90 billion. In other words, the impact of the "AI disrupting everything" narrative on Oracle Corporation's fundamentals is real and significant, but it is more about reshaping capital expenditures, free cash flow, and valuation frameworks, gradually transmitting to organizational structures. Twitter co-founder Jack Dorsey's Block laid off over 4,000 employees in one go, nearly half of the company's total workforce. The company's public statement indicates that agent-based AI tools in AI intelligent agent mode allow smaller teams to operate more efficiently; its CFO further stated that the significant efficiency gains brought about by focusing on agent-based workflows powered by AI intelligence agents make deep layoffs almost "inevitable" for any organization. In contrast, while Oracle Corporation has indeed refocused Fusion Cloud software into Agent AI/Agentic AI workflows, aiming to have the system directly deliver business results and automate a large number of repetitive processes, the signal the company has publicly given on layoffs is mainly about restructuring, cost reduction, and making way for AI data center construction, rather than framing layoffs as "AI is already capable of replacing traditional organizational layers" as Block did. For Oracle Corporation, the stronger narrative of layoffs at present is about continuing explosive growth in AI computational demand, pushing data center GPU, power equipment, and other infrastructure and financing needs to unprecedented levels, requiring the company to reallocate resources from low-return areas to high-growth areas.