Oracle: Despite some AI advantages, the moat rating drops when there is a risk of disruption

Key Morningstar metrics for Oracle

• : $215.00
• : ★★★★

• Morningstar Economic Moat Rating

  : Eng

• Morningstar Uncertainty Rating

  : Very high

We lowered our economic moat rating on Oracle ORCL after a review of the potential disruption of the global technology sector by artificial intelligence.

Why it matters: To issue a wide moat rating, we must assume that the company can almost certainly generate a return on invested capital in excess of its cost of capital over the next decade. As AI’s capabilities expand rapidly, we are no longer confident that Oracle’s wide moat is safe.

• Oracle’s database and enterprise software is deeply integrated into customers’ mission-critical business processes. However, they are not immune to the disruptions of AI, as large language models are capable of enabling a brand new natural language-based user interaction paradigm.
• Oracle Cloud Infrastructure is poised to benefit…