Oracle (ORCL +10.84%) stock sank 6% through 10:05 a.m. after news broke this morning of a falling-out the company may be having with key server supplier Super Micro Computer (SMCI +11.59%).
According to technology-focused equity research house Bluefin Research, Oracle has just canceled an order for 300 to 400 Super Micro GB300 NVL72 server racks loaded with Nvidia (NVDA 1.00%) chips.
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What this means for Super Micro
Bluefin estimates the cost of each rack at $3.5 million, so a loss of 300 to 400 racks could cost Super Micro anywhere from $1.05 billion to $1.4 billion in lost sales. It's not a total loss for Super Micro, however, because Bluefin says the company shipped somewhere between 100 and 200 racks before Oracle canceled its order.
That said, Bluefin argues Super Micro is also losing sales to xAI ahead of the SpaceX IPO. (And SpaceX now owns xAI.) So things are not going well for Super Micro.
NYSE: ORCL
Key Data Points
What does this mean for Oracle stock?
Pundits think that Oracle canceled the contract to distance itself from accusations that Super Micro co-founder Yih-Shyan "Wally" Liaw was involved in illicit sales of Nvidia chips to China -- and that may be true.
But another possible explanation for Oracle canceling orders for artificial intelligence servers is that... Oracle is feeling overextended in AI and wants to reduce its risk if costs keep rising and revenue stubbornly refuses to grow fast enough to support all its spending.
That's the big worry surrounding Oracle today. AI revolutions are great and all, and a lot of investors have made a lot of money from this one. But this turns into a game of musical chairs, and the music suddenly stops, Oracle won't be sitting pretty.
