Oracle’s Strategic Crossroads: TikTok Deal Provides Ballast Amid AI Funding Concerns

Oracle US68389X1054

Oracle finds itself navigating a complex landscape where significant strategic progress is tempered by substantial financial questions. The technology giant has recently secured a pivotal partnership with TikTok, yet simultaneously faces a funding gap for a critical artificial intelligence expansion. The company's trajectory now hinges on its ability to bridge this financial divide and convince the market that its long-term prospects outweigh near-term execution risks.

A major cloud on the horizon is the reported collapse of a substantial funding arrangement. Blue Owl Capital has withdrawn from a planned $10 billion project financing package intended for Oracle's "Stargate" AI data center development in Michigan. This facility, designed with a one-gigawatt capacity, is expected to host workloads for partners like OpenAI.

This withdrawal forces Oracle to urgently seek alternative capital sources. Reports indicate the company is in discussions with other asset managers, potentially including Blackstone, though no concrete agreements have been announced. This situation underscores the immense capital intensity of the AI infrastructure race and highlights why Oracle's projected capital expenditures for fiscal 2026 are drawing scrutiny from cash-flow-focused investors.

The stock's recent performance reflects this tension. While shares have gained on a weekly basis, they remain down over a 30-day period. Trading approximately 41% below its 52-week high, the equity has undergone a significant valuation reset.

The TikTok Joint Venture: A Strategic and Financial Pillar

Counterbalancing these concerns is a newly solidified joint venture centered on TikTok's U.S. operations. Oracle has joined a consortium acquiring the video platform's American activities, with the new entity valued at approximately $14 billion. Oracle is slated to hold a 15% stake.

The strategic importance, however, extends far beyond the equity holding. A core component of the agreement appoints Oracle as the exclusive cloud provider for TikTok's U.S. data. Market analysts view this as a high-margin, long-term contract and a powerful endorsement of Oracle Cloud Infrastructure's (OCI) security and compliance capabilities versus rivals like AWS.

For Oracle's stock, this deal currently acts as a stabilizing force. After a period of volatility, the share price has recently found firmer ground, closing yesterday at 165.72 euros, though it remains well below previous peaks.

Valuation, Technicals, and Insider Activity

The stock's correction has placed it notably below key technical indicators, including the 50- and 200-day moving averages, suggesting persistent downward pressure. Interestingly, with a Relative Strength Index (RSI) near 69, the stock is technically approaching overbought territory following its recovery over the past seven trading days.

Adding another layer to the narrative are recent insider transactions. Mandatory disclosures show that Vice Chairman Jeffrey Henley and other executives reported transactions this week involving trust transfers and sales totaling nearly $2 million. Some market participants interpret this as prudent portfolio management in a volatile environment rather than a definitive signal of a fundamental shift in sentiment.

Sector observers are increasingly discussing an "AI reality check." While demand for computing power remains robust, the willingness of financiers to underwrite colossal infrastructure projects with few conditions appears to be waning. Analysts draw parallels to the period around 2000-2001, when infrastructure investments temporarily outpaced immediately realizable revenue, ultimately pressuring valuations.

The Path Forward: Key Factors to Watch

In the near term, a primary focus will be Oracle's success in securing alternative financing for the $10 billion Michigan project gap. A deal with a major infrastructure fund like Blackstone could swiftly alter the cautious market mood and reopen upward potential for the share price.

The technical picture will also be influential. Measured in U.S. dollars, a support zone has recently emerged between approximately $180 and $190. A breakdown below this level could trigger automated selling programs, whereas stabilization near current prices could be viewed positively as the company heads into 2026.

Fundamentally, Oracle's substantial backlog exceeding $100 billion remains a cornerstone argument for bullish investors. The coming quarters will reveal whether the company can leverage the TikTok partnership and a secured AI expansion plan to convert this pipeline into robust revenue growth and stable cash flows.