What's Happening?
Oracle's stock has experienced significant volatility, closing at approximately $223 after a recent rebound but still down 25-30% over the past month. This decline is attributed to concerns over Oracle's planned
$38 billion debt raise for AI data centers, adding to its already substantial debt load of over $100 billion. Oracle's ambitious AI projects, including a $300 billion compute deal and the $500 billion 'Stargate' project with OpenAI, are under scrutiny as OpenAI signs a $38 billion cloud deal with AWS. Michael Burry has criticized Oracle and other AI leaders for overstating earnings through long depreciation schedules for AI hardware. Despite these challenges, Wall Street's 12-month price targets for Oracle remain in the low-to-mid $300s, with some firms maintaining targets above $400 ahead of Oracle's December 8 earnings report.
Why It's Important?
The developments surrounding Oracle's AI investments and debt strategy have significant implications for the tech industry and financial markets. Oracle's aggressive borrowing to fund AI infrastructure could impact its credit ratings and investor confidence, potentially affecting its stock performance. The involvement of major players like AWS in OpenAI's cloud deals raises questions about Oracle's share of the AI market and its long-term growth prospects. Michael Burry's concerns about accounting practices could lead to increased scrutiny from regulators, affecting Oracle's valuation. The outcome of Oracle's December earnings report will be crucial in determining whether its AI strategy can deliver the expected growth and justify current stock valuations.
What's Next?
Oracle is scheduled to report its Q2 FY2026 earnings on December 8, 2025, which will be a critical moment for investors. Analysts are watching for any signs of weakness in AI cloud margins that could prompt a reevaluation of Oracle's stock targets. The upcoming shareholder meeting on November 18 may bring further scrutiny of Oracle's debt plans and AI contract terms. Investors will also be monitoring any changes in bond spreads or credit-rating outlooks, as well as updates on OpenAI's spending plans and partnerships. The broader tech market's performance, including movements in Treasury yields and credit markets, will also influence Oracle's stock trajectory.
Beyond the Headlines
Oracle's situation highlights broader ethical and financial considerations in the tech industry, particularly regarding the sustainability of AI investments and the transparency of financial reporting. The heavy reliance on debt to fund AI projects raises questions about long-term financial health and the potential risks of over-leveraging. The scrutiny of accounting practices by figures like Michael Burry could lead to industry-wide changes in how AI-related assets are valued and reported. Additionally, the competitive dynamics between major tech companies in securing AI infrastructure deals could reshape the landscape of cloud computing and AI services.
