Motley Fool Hidden Gems Investing - Oracle Calls Force Majeure Already?

Episode Date: September 24, 2026

Two years into a four year plan to build a massive data center in New Mexico, Oracle is already claiming force majeure. The company announced it would not be on the hook for payments should the project not meet its deadlines. Lou, Jon, and Tyler break down why Oracle seems so intent on getting ahead of this right now and the implications it may have down the road. Plus, maybe fintech doesn’t have that many barriers to entry after all and a listener question about spinoffs Have a question? Email us; [e-mail] Tyler Crowe, Lou Whiteman, and Jon Quast discuss: - Oracle is already preparing for delayed data centers - Is its commitments to OpenAI a reason behind it? - Mailbag: How to handle spinoffs - Latin American and European fintechs are coming to America - Mailbag: European AI Infrastructure stocks? Companies discussed: ORCL, OWL, BE, MDT, MMED, GEV, GEHC, SOFI, XYZ, TOST, FOUR Host: Tyler Crowe Guests: Lou Whiteman, Jon Quast Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Oracle is forcing the issue with AI. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host Tyler Crowe, and today I'm joined by longtime full contributors, Lou Whiteman and John Quast. And guys, we had a plan for today, but using the term from one of our prior hosts, the news fairy showed up right before we recorded and we decided we had to change it up a little bit. We're going to start today with the news that Oracle has called Force Majurer on a news.

new data center project in New Mexico. And I want to channel my like Ron Burgundy voice from Anchorman because boy, that escalated quickly. I mean, basically Oracle is claiming that it isn't liable for costs or expenses if this project, I think it's called a Jupiter project, is delayed. It's supposed to come online in 2028. And this story almost reads like a usual suspects line of the infrastructure play or, you know, theme that we've seen. And especially a lot of the ones where the thesis is a little bit shakier. I mean, we have a subsidiary of private capital company, Blue Owl is the developer. Obviously, private capital and developing has been a challenge one there. It is one of the big projects backed by OpenAI and SoftBank. And additionally, on the energy side,

it's the one project that has committed to using fuel cells, which has been part of the thesis for Bloom Energy getting into the AI infrastructure trade. We've got a lot of things kind of up in the air here. This project was announced two years ago and wasn't expected to come online for a bit. Like, all of these stocks are down today. Guys, what was your reaction to this? Because I found this one kind of alarming.

It makes total sense to me that Oracle would make this move. And here's why. Nobody is going to argue that Oracle isn't pushing the limits when it comes to extending itself to fund the data center infrastructure buildout. It is absolutely extending itself.

Now, you can succeed, even when you extend yourself, you just have to make sure that money coming in is going to cover the money going out, right? And when it comes to this data center in particular, there are reasons to think that maybe this doesn't come up when Oracle wants it to come up, when it expects it to, when it needs it to.

The tide of opinion, public opinion, has turned violently against data. centers. And I would say it's maybe even worse in left-leaning states such as New Mexico where this particular project is. So there is real reason to say there might be delays from regulatory bodies, from all sorts of things that could push back when Oracle is able to monetize this data center. So it makes sense to me that it would put this clause in place so it's not having to make payments before it is generating revenue. That doesn't necessarily mean that the project is doomed.

It doesn't necessarily mean that Oracle is now in big trouble, but it does point to the fact that Oracle has extended itself and it really can't start making those payments before it is getting the job done there on the project. Here we go, right? Tyler, exactly what you said, that we have all of these companies that have been into headlines. I think the most, I think John's right that like a lot of this is just technicality, like reserving rights. I do think it's fun and we should talk about it in a second, like, why now, why this second? Because I want to speculate there. But look, I think this is really

useful for investors, whether or not it's good news or bad news. John says that, you know, lefty in the States, but look, we're seeing moratoriums in Texas. We're seeing moratoriums all over the place. This is, we've been saying forever, this is going to come up. And, and, you know, there's been an open debate among pundits, among analysts, among lawyers about exactly what would happen, who's liable, how much liability, where it all falls. I think it would be really useful for it to play out once. And so we could answer these questions instead of yell across the aisle at each other. So, you know, bring it on. If Oracle is successful in this, it takes pressure off Oracle and maybe some of the other ones that are making commitments. Maybe it means more

predict commitments. You know, it might mean people are more aggressive because they can kind of go further on to thin ice and be safe. If they get slapped here, it could at least cause a rethinking. If they do walk away, can blue owl backfill? We get a kind of a test on demand. There are so many kind of questions that have been out there just as hypotheticals or as stuff for people like us to argue about without anybody knowing that maybe if this plays out, we'll start to get answers to. And as an investor, that's clarity over time. I've got a couple questions here. And one of them I may actually have to put on like a conspiratorial tin hat. You may have to walk me off the ledge here a little bit. But here are like some of the

reactions I immediately thought of when I saw this was number one. Like Oracle's calling force major two years before they even have to like make a payment on anything. That was in some senses to me alarming. Like coming from oil and gas, when I hear force major, it's like something bad happened right now and I can't deliver on a contract. like three months from now, not, you know, two years is a long development time. And the fact that they're already calling this is somewhat questionable because I think of when we have been talking about this development, Oracle has been, as we've said, one of the shakier ones. It's been using off-balance sheet deals to get it done, not taking on a lot more debt relative to the

alphabets, the Amazon's, the world to do it. And so to as quickly call force major, I found, fascinating and also a little bit on the competitive position here. And here's my conspiratorial thought. And again, you can walk me off the ledger, but Oracle has been doing a lot of these deals with Open AI where it's like Open AI, they take an investment in Open AI. And we've talked about these circular financings. And now all of a sudden, all of these AI companies are delaying their IPOs for safety reasons, or they're saying safety reasons. We've seen a lot of stories coming out about obvious safety questions. And so part of me is saying, like, well,

maybe Oracle's doing this because they know they are going to struggle to get paid from the people that they said they've got the commitments from. I think that's interesting. I mean, look, I think that my conspiracy theory on these safety things is that these companies pre-IPO want to focus on revenue and not the science project. And that would mean kind of, you know, maybe not the frontier

models getting all of the attention. And so less compute needed. It's hard to say, but I think that's possible. I do think, you know, I said like, why them and why now? I think are very interesting questions. I think the why them versus, I don't know, alphabet or someone else that's doing this is because, as we know, Oracle is starting from a weaker foundation. They do have kind of thinner ice here. Not that it's too thin, not that they're going to fall, but they do have, you know, they do have less resources to back this up. The why now fascinates me because you're right. It could

just be that, or it could be that either Oracle is taking questions on this based on what they've already borrowed and some of their creditors are asking questions, or it could mean they want to do more deals, and this, you know, kind of the threat of this or the liability attached here is kind of holding things back. The big takeaway, we don't know. A lot of it is a speculation, but the big takeaway here is, I guess what we already knew is that, you know, Oracle isn't coming from a position of strength, period. I'll meet you halfway, Tyler. I mean, when you think about where everything is going, it's undeniable that the long

tail is still in place. We are reimagining the entire infrastructure of the internet, and I don't think that anything stops this train. But everything is so fast changing that who is leading, how are they leading, and what are the compute requirements to do that? it changes so quickly that anything is is up for debate and whether or not yeah open AI specifically is saying oh we're needing to rethink some things here with our situation with oracle i mean that is a valid question to be asking and wondering if that conversation isn't happening in another

room all i'll say is if there's one thing that can stop this train it's been very good at stopping trains in the united states it's litigation in court so i think we could hear You have a fascinating story coming up here. We'll get a little bit back more on schedule coming up back to the break. You just found out that your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Since it's built on your real-time people and business data,

Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk and fix it before it's missed. Question answered, action taken, crisis averted. When you have critical business questions that need answers, don't just file a ticket and wait weeks for an outdated report. Describe what you need and have Rippling AI build it instantly from your live people and business data. Whether it's a dashboard with detailed charts or automated workflows with the right triggers, conditions, and approvals. Ready to rule your business?

Head to rippling.a.i slash fool to get the only AI built to give you full visibility and take complex actions across your entire organization. That's R-I-P-P-L-I-N-G-A-I-S-O-L. Sign up for exclusive access today, rippling.a-I-S-F-Fool. New from Nespresso. Blend wellness into your coffee routine with a coffee plus range infused with functional benefits. Choose the coffee you love with added B vitamins, like coffee plus B-12 to help support immune function, and coffee plus B-6 to keep your day moving. Or go with the flow and choose ginseng delight. Our new double espresso with ginseng extract. Whatever lies ahead, don't change your morning.

Let your morning change you. Discover Coffee Plus on espresso.com. Now, normally we do a listener question at the end of the show, but today we got a pretty meaty question here, so I wanted to give us a little bit of extra time to discuss it. Remember, if you have a question, go ahead and email us at podcast.com. That's podcast with an S.

We have also got the email in the show description, in case you need it there. Today's question comes in from Zach, and guys, I'm going to split it up because it's a, like I said, meaty question, several questions, and I thought it was worth diving into. Hi, Motley Fool Team, long-time listener and love the show. With Medtronic recently launching a voluntary exchange offer to separate its diabetes business mini-med, I have been thinking about how everyday investors should evaluate these types of corporate actions. Since you provide great high-level educational perspectives in the mailback. Thanks, Zach. Could you break down how splits an exchange office?

offers work, and we'll start with this first question that he wants specifically. The dividend investor dilemma, how should income-focused investors weigh keeping an established dividend payer versus swapping for a fast-growing non-dividend pure play, even with a built-in incentive? And in this case, for the Medtronic mini-med thing, there's a 7% valuation discount that you get as investor as part of the spin-off. So, guys, a dividend investor getting a non-dividend stock in an exchange. How does this work? What are your thoughts? There's a reason why we don't give personalized investing advice on this show. It's not just covering our back end. It literally is because so much of investing is personal and you would need to know somebody's personal

situation so intimately and we don't. So we don't speak to individual situations. And in this, it's very relevant for this question. The debate between dividends, income and growth, revenue growth specifically, I would say that on paper, it makes sense to go with growth. Boston Consulting Group did a long, long study over 20-year rolling periods, I believe it was, or maybe it was 10-year rolling periods, showing that among the top quartile of best-performing stocks, growth was the biggest contributing factor to the gains. And so on paper, that to me points to, I want to maximize my portfolio for growth because that's going to outweigh the boosts that dividends provide. However, real life investing doesn't take place just on paper. It takes place

in the real world where I have real concerns, I have emotions, and I have things that I want to see in my portfolio. And I don't, maybe people don't want to have the volatility that comes with growth. And that is part and parcel to that method of investing. So it really depends on the situation. I think that having a stack of just consistent dividend paying stocks makes sense in a diversified portfolio. I also see the rationale in saying, I'm going to trade out this dividend payer for a better growth opportunity. I think either can make sense depending on your situation. Right. I think, yeah, Zach kind of tip the scales for me in kind of how he worded the question, because he said, how should an income-focused investor? And again, I don't know, Zach, I can tell you,

those, how I would think about this. If I bought Medtronic for the dividend, if I'm focused on income, I'm probably keeping the income and I'm going to be more swayed by keeping Medtronic and keeping the dividend. The great thing about this, and he kind of asks also like how to split all and exchanges work, it's basically a tax free. Sometimes you get both. Sometimes you got to choose one or the other, like in this case, but it's a tax free kind of carving up at the company. Here's the great thing. You can have both. You can keep your Medtron. You can keep your Medtron. and buy the other company, Minimed, buy shares for the same tax implications if you want. So you kind of don't have to choose.

Your choice would be you have to commit new capital. But look, if you are an income focused investor and that's the reason you bought a dividend stock, I think if it was me, I'd probably lean towards keeping the dividend stock. If you're focused on growth and you bought Medtronic because you were excited about the growth, then probably the dividend means less to you and maybe you look at the other one. So here's the second part of the question. And I'm going to try to make it a little bit more general because, you know, Zach's question is a little bit focused on the health care part. But what does it for in terms of your portfolio strategy, what does it signal when an established giant company divests a smaller unit that as a result, you know, it drives up top-line revenue but kind of makes for lower margins?

It can go in a lot of different directions here, and I'll let you guys go and then I'll finish up. Well, the first thing that comes of mind, I think with any split or any time a company breaks itself in two, there is, if you think about it, a war for capital inside any company with multiple divisions. Not everybody gets the same amount of capital. The parent, the CEO only has so much allowance to give to his subsidiaries and they're fighting for it. In general, in theory, why splits work is that competition goes away. Both companies, in this case, you have a maybe slower growth and a faster growth. They can allocate capital towards the needs of their specific business. So that is kind of the bull case for splits in general.

Whether or not it's a good idea, bad idea, I think, again, that's an individual, you know, case-by-case thing. I will say in this case, a huge flag is that they are offering a premium for investors to like mini-met. They are offering that, as Zach mentioned, a 7% valuation discount. Now, it could be because Medtronic is a dividend player, they think their investment base is less interested in growth, so they're just trying to even the playing fields that way with their target audience. Or it could be a signal that the market is probably favoring Medtronic. I, you know, it's again, it's hard to just give one-size-fits-all answers here, but I do think you have to read the individual situation and kind of figure out like what are the what are the signals telling you like if I'm playing

poker with Medtronic here what is the tell here what are they telling me that they're not telling me that I can use to make a decision yeah I like this move as far as splitting out Minimed from Medtronic I think it was a good move when you talk about the difference of the growth rates it's not that different I mean minimet is better but it's not drastically in another category of growth level. It's, you know, mid single digits and high single digits. It's not that huge of a difference, but the profit margin difference is quite significant. And so it does make sense to me for Medtronic to spin out Minimed and then be able to dedicate its own capital to growing its higher margin business. That to me is going to potentially grow profits faster at Medtronic than what the profits

going to grow at minimed. So it makes a lot of sense to me that it would make this move. But stop me if you've heard this one before, I mean, if we're taking broad takeaways here, every deal is different. Everything is unique. And so each one does need to be examined on the merits. There are times in the past where I thought that a business made a mistake to split up a company, make a corporate move like that. And there are other times that it was clearly the right move. I would say do your best to see what is motivating it. Is it a good business decision? Can you see the business rationale?

Or does it feel like we're just trying to win some shareholder, you know, rally the shareholder troops or something and make it seem like we're doing something when really both ships are going down? To speak more generally to it, and I think you guys would likely all agree with this, is sometimes the consensus thesis is wrong and perhaps your own thesis is wrong as well.

We've seen plenty of occasional. where we've had splits or divestitures or spin-offs or something like that. And the market consensus was, oh, this was the great part. And you're left with the duds. And what it ended up happening was that theoretical dud ended up doing much, much better. I think the GE split was a great, or general electric split was a great example. Everyone thought that GE Healthcare was the cash generating crown jewel that got split off. And it's true.

It generates a lot of cash. but they thought GE-Vernova was going to be the problem child. We look since the split, GE-Vernova has been by far the greatest performer out of all of those in large part because of shifting dynamics and whatnot. But whatever your initial thoughts may be with a lot of these spinoffs, reserve the right that it could change. Coming up after the break, we're going to talk about fintech and the changing landscape there. New from Nespresso. Blend wellness into your coffee routine with the coffee plus range infused with functional benefits. Choose the coffee you love with added B vitamins, like coffee plus B12 to help support immune function,

and coffee plus B6 to keep your day moving. Or go with the flow and choose ginseng delight. Our new double espresso with ginseng extract. Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. We're actually going to start today's show with this news story, but with the Oracle News, we thought we needed to stop there.

And this particular story here, I think goes under the category. Be careful what you ask for because we've seen a lot of fintech companies going public recently, doing actually relatively well. And a lot of them have been arguing against regulations in the banking industry because they're protecting the entrenched interests. Well, they've kind of gotten what they've asked for with more relaxed regulations as of late. And as a result, we're going to see some very large competition coming into the space. Latin American fintech company New Bank and European fintech giant Revolut.

These are companies that are much, much larger than a lot of the fintech companies we see in the United States today. They are actually looking to get banking charters and looking to come to the United States. and in large part because the United States banking industry is so much larger than in their current markets, and they see it as an opportunity for growth, despite all of the entrance in the market already in the United States. So, guys, when I read this report, the immediate thing that I said was, wow, the barriers to entry in this industry mustn't be as much as some of the bulls in the fintech business thought it was. I mean, what does this say about the industry? I'll tell you, like this is just confirmation bias for me. And I go back to the 1990s when I had to sit through the Stonyer School of Banking.

And I remember something really kind of stayed with me and it kind of guides me here is that really all this industry is doing is buying and selling money and trying to make money that way. And almost all innovation in this space is just marketing. All right. And really, that's why I've avoided the fintechs. I think this is just another reminder of how easy it is to compete here. There are 8,000 banks and credit unions in this country. There are over 500, maybe close to 1,000 online only. There's nothing special about any of these things. At the end of the day, banking is a simple business. Anyone can grab share with either strong marketing or aggressive pricing.

And look, just hold your valuations accordingly. Why does New Bank and Revolut want to come to the U.S.? The answer is why wouldn't they want to? This is a huge market and the opportunity right now with people in charge of the federal banking area saying the USA is now open for business, unlike how it has been in the past. So this is the window. They're saying this is a huge market opportunity and regulatory environment is such that we're going to be able to waltz in. To lose point, what they do with it from there is really how they're. They run the campaigns, right?

I mean, it's not like this is a growing space necessarily. The U.S. market is very saturated. Can you take share with good optics? I think that you can. So there might be a little bit of an opportunity here. I think that the bigger issue with Fintech right now is not necessarily the barriers to entry. It is more the shifting dynamics.

I do think that the agentic economy, to go back to what we were saying earlier, nothing stops this train. I think that nothing stops the agentic layer that is being built right now. We're seeing it happen where I'm telling my AI agent to do certain transactions on my behalf. I think that it's only going to get more profound. And what does that do to your fintech layer of the internet? I think that things get really different, really fast.

I think that this points to companies that have like a network effect that we're saying, hey, this is why we have an advantage here, such as Block's Cash app. I think that that is one that might be challenged in this environment, this growing agentic economy. But I think that it points to the physical point of sale device, perhaps being a little bit of a moat in some ways because the agentic commerce angle does not impact what I do at a stadium when I buy a hot dog. That's still going to be a physical transaction. So a physical point of sale device where those companies are able to have a take rate, that seems a little bit

more durable to me. So I think your shift four payments, I think that you're toast, I think that those are layers that are able to endure a little bit, but I think that some of your pure play internet fintechs, those may see their margins start to contract. Lou, as we finish out here, like, Revolut has not, it's still publicly traded. I think it's about, about $120 billion valuation on the private markets. It's looking at doing an IPO, perhaps in a dual listing, U.S., London, sometime in like 2027, 2028. With that in mind, John highlighted some of the companies he sees as benefitors of this specific

trend or, you know, the lack of competition. Are there any companies that you see that are beneficiaries of this more lax regulation or the shifting sands, you guess, if you will, in the fintech space? The issue is I have with all of this is that I don't think that there is innovation that really makes consumers lives better. There is temporary pricing power. We saw SOFI for all of its success, and SOFI has been a great success in growing its customer list. They've done that at the expense of cross-selling, so profitability, and also they've done it by with kind of irrational pricing or less rational pricing. So there is a ging for every gang. I don't think that,

For all the rhetoric, yeah, we're bringing new people in. I don't think things are shifting that much. If there is opportunity, and this is the most boring way to look at it is, though, I think you're going to see a lot of credit unions convert the banks and become stocks, and those are some of the small caps that I think are tomorrow's big winners. So that's kind of where I'm looking here. As for fintech, it is a commodity. Even those payment, even toast things someday can be whittled away to a commodity.

just be aware that they can be good businesses, but pay an appropriate valuation for these things. Lou, thrift conversions to stocks from credit unions sounds like the most Lou thing imaginable for this podcast. There's a lot of money to be made, Tyler. Well, that's all the time we have for today. As always, people on the program may have interests in the stocks that talk about,

and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. All personal finance content follows Motley Fool, standards, it is not approved by advertisers. Advertisements or sponsor content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks for our producer Dan Boyd and the rest of the Motley Fool team. For John, Lou and myself, thanks for listening and we'll chat again soon.