Key Stats for Oracle Stock
- 2-Month Price Change for Oracle stock: -40%
- $ORCL Share Price as of Nov. 21: $199
- 52-Week High: $346
- $ORCL Stock Price Target: $345
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What Happened?
Oracle (ORCL) stock has become the poster child for AI-related excess. The nearly 50-year-old software company rallied furiously last summer as investor enthusiasm for artificial intelligence surged.
But ORCL stock has given up most of those gains, falling more than 40% from its September all-time high.
The decline is steeper than other AI plays. Meta Platforms, Palantir Technologies, and Advanced Micro Devices all dropped at least 20% from their peaks, but Oracle’s fall has been more dramatic.
The concern centers on one question: Are companies spending too much on AI infrastructure relative to the revenue they’ll actually generate?
Oracle raised $18 billion in new debt last month to fund its infrastructure buildout, pushing its total debt over $100 billion. In January, Oracle announced it was joining forces with OpenAI and SoftBank on Stargate, a $500 billion project to develop AI infrastructure in the United States.
The company’s September earnings report initially sent ORCL stock soaring 36% in a single day, making co-founder Larry Ellison the world’s richest person.
But a few weeks later, Oracle announced that longtime CEO Safra Catz would be replaced, and the stock has been declining ever since.
At Oracle’s recent Financial Analyst Meeting, the company unveiled staggering growth targets. Management expects revenue to reach $225 billion by fiscal 2030, representing a 31% compound annual growth rate over five years. They also forecast earnings per share of $21 by fiscal 2030, a 28% annual growth rate.
Investors are questioning whether these projections are realistic or overly optimistic given the massive capital requirements.
Oracle’s remaining performance obligations now exceed $500 billion, up 359% year over year. Clay Magouyrk, Oracle’s Chief Technology Officer, revealed the company signed $65 billion in new infrastructure contracts in just 30 days during the quarter, across seven deals from four customers.
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What the Market Is Telling Us About ORCL Stock
The market is weighing Oracle’s massive AI investments against uncertain future returns. Traders have started piling into Oracle’s credit default swaps to hedge and bet against the AI trade.
These derivative contracts serve as insurance against the possibility that Oracle might default on its debt obligations.
Goldman Sachs analysts warned that consensus capital expenditures for AI hyperscalers, including Oracle, have risen to $533 billion from $467 billion at the start of the third-quarter earnings season.
The firm noted that circular deals between AI software makers, chip companies, and cloud operators are raising eyebrows about whether demand is organic or inflated by self-dealing.
ORCL stock faces scrutiny because Oracle is both spending heavily on AI infrastructure and is deeply embedded in the web of deals between major tech companies.
The Wall Street Journal reported that a large chunk of Oracle’s outsized revenue backlog came from a single OpenAI deal.
Some market observers see opportunity in the selloff. Oracle is winning major AI infrastructure customers, including OpenAI and Meta, precisely because the company can deploy capacity faster than competitors.
The company completed a facility in Abilene, Texas, in less than a year that will become the largest supercomputer ever built.
Oracle’s AI Database platform is also gaining traction and is expected to reach $20 billion in annual revenue by fiscal 2030. Oracle can now deploy its database across all major clouds, including Azure, Google Cloud, and AWS, as well as its own Oracle Cloud Infrastructure.
But concerns remain about profit margins as Oracle illustrated that a hypothetical $60 billion, six-year AI infrastructure contract would generate 35% gross margins after accounting for startup costs.
Investors are questioning whether these margins are sustainable at scale and whether the largest customers might negotiate even lower margins.
The broader debate about an AI bubble isn’t helping ORCL stock. Billionaire investor Ray Dalio said his personal bubble indicator is relatively high, though he cautioned investors not to sell just because there’s a bubble.
Other market veterans like Howard Marks say valuations are “high, but not crazy,” suggesting the market hasn’t reached true bubble territory yet.
Ellison emphasized that AI represents a greater opportunity than the Industrial Revolution or electricity.
The company highlighted its complete technology stack advantage, with customers spending 150 times more on average when they use Oracle’s infrastructure, database, and applications together versus a single product pillar.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
