Shuli Rin: "Oracle" Leap raises questions about the criteria for evaluating investment

What is the fair value of a technology company? This question is no longer good answers in light of the rapid change of artificial intelligence in the investment scene. The latest shock of the company “Oracle”, a database giant that, according to the Silicon Valley standards, was already one of the established businesses. The shares rose 36%, which has been the largest increase since 1992, after the company signed ‘large cloud contracts with large artificial intelligence businesses’. The total commitment of the remaining performance (RPO) – or the contracted revenue the company expects to collect – has reached $ 455 billion, increasing more than four times compared to the number last year. It was a big shock, although this enormous enterprise was covered by 47 mediators, which was supposed to know it well. Read more: The market value of “Oracle” surpasses “JP Morgan” thanks to Cloud Services. There is no doubt that this big surprise in profits is a win for the chairman of the Board of Directors Larry Ellson. His company went through the Dot Com cycle in the 1990s, when the value of its share fell by more than 80% after the bubble explosion in 2000. Although the price of the “Oracle” share was found after decades, he lost much of his glamor. It is no longer part of the ‘seven major’ businesses, nor was they seen as one of the most prominent beneficiaries of the artificial intelligence revival. Analysis of artificial intelligence, but unfortunately, this sharp increase in the ‘Oracle’ share also causes a difficult question whether sales analysts can evaluate technology companies in the era of artificial intelligence. Although the capabilities of this technology improve in an unfair or sometimes expected way, investment specialists must consider this aspect without their expectations looking illogical. During the profit call, Ellison focused on ‘Derivation of the use of artificial intelligence’, which is the process of using a pre -trained model to generate content in favor of the current database clients. These new applications, which facilitate companies and learn and withdraw from their own data, enjoy a promising future. Analysts may be familiar with the market potential, but they can hesitate to measure it in a meaningful way. Ultimately, the percentage of US businesses’ dependence on artificial intelligence at economics level is only 9.7%, according to the Goldman Sachs Group. Loss of trust in traditional evaluation instruments increases the problems of developing reliable perceptions of future cash flow due to the fact that the largest players in the world of artificial intelligence are private enterprises, so the law does not compel them to disclose their capital expenditure unless financing is collected. For example, it is reported that Openai will spend $ 115 billion after 2029, a number of over $ 80 billion for its previous estimates. But no one knows exactly how much these extra expenses are going to “Oracle”. All we know is that the general trend indicates a greater demand for cloud computing services, which are provided by Ellison. Also read: “Oracle” offers “opening” of two million artificial intelligence segment of these data centers, but it is possible to observe the danger of analysts to reduce the company’s ability to achieve profits. In the long run, they will lose their credibility, and investors will simply neglect the repetition of evaluation – which is the most important anchor in the stock market. What is the benefit of looking at the price ratios to future profits if the money managers believe that analysts do not have the slightest idea and are always late in a step? There was a similar feeling during the Dot com bubble. There is no doubt that the owners of the daring capital in the Silicon Valley are fully ready to say that the evaluation doesn’t matter when revolutionary technology is still at the stage of development because they cannot justify their investments in another way. Here is an example: investors, including the ‘softbank’ group, ‘thrive capital’ and ‘dragoned’, buy shares in ‘Oben AI’ with a 500 billion dollar rate, which is almost twice the price they paid about six months ago, so why is this dramatic change? In the direction of new evaluation models in the past, investment analysts use the terminated cash flow models or bargain complications to get an idea whether the share is exaggerated in evaluation or low price. But if we enter into a new world order and the rise of revolutionary technology, how can we predict the unknown? You may be interested in: “Oracle” ridiculous cloud services at the beginning. Then the transformation took place, the idea of ​​incorporating the options price models within corporate evaluations, by including the value of the option to take into account the unlimited growth scenario, and maybe it’s time for the sales team to listen to the advice.