Oracle Shares: A Potential Rebound After Steep AI-Driven Selloff

Oracle's stock faces pressure from AI capex costs but an analyst upgrade highlights an improved valuation. Key debates center on $50B funding plans and a massive $520B backlog.

Oracle's stock has faced a punishing start to 2026, driven by investor anxiety over massive capital expenditure plans and uncertainty surrounding key partnerships. However, a recent upgrade from a prominent analyst is fueling debate on whether the selloff has been overdone, potentially creating a compelling entry point for investors.

The Bull Case: An Attractive Valuation Emerges

Following a decline of nearly 25% since the beginning of the year, analyst sentiment is beginning to shift. Oppenheimer’s Brian Schwartz upgraded Oracle’s rating from "Perform" to "Outperform" on Wednesday, assigning a price target of $185. The investment bank’s rationale centers on valuation, arguing that the recent selloff has made the shares attractive once more. While acknowledging that the transition to a more capital-intensive business model will take time to reflect in financial statements, Oppenheimer believes the risk-reward profile has improved significantly. The firm also forecasts robust long-term earnings growth, suggesting a potential doubling of earnings per share by fiscal 2030.

The Bear Thesis: Cost Concerns and Partnership Jitters

The pressure on Oracle’s share price is rooted in concrete investor concerns. The primary focus is the enormous cost of expanding its data center infrastructure to compete in artificial intelligence. To finance this expansion, Oracle plans to raise up to $50 billion through a combination of debt and equity offerings. Market observers are critically questioning how this substantial expenditure will impact profit margins and cash flow in the near term.

Further dampening sentiment have been reports that the planned "Stargate" project—a $500 billion joint venture involving OpenAI and SoftBank—has encountered obstacles. Reported disagreements over structure and personnel have weighed on sentiment across companies heavily reliant on OpenAI workloads, including Oracle.

A Colossal Backlog as a Counterargument

Despite the prevailing skepticism, a strong counter-narrative exists. Oracle points to a massive Remaining Performance Obligations (RPO) backlog exceeding $520 billion, underscoring sustained, high demand for computing power. Where skeptics see rising debt, proponents view this record backlog as validation for the company’s aggressive infrastructure investment strategy.

The critical factor for the stock’s future trajectory will be management’s execution. Success hinges on efficiently deploying the planned $50 billion in capital without excessively diluting existing shareholders. If the company can translate its historic backlog into profitable growth, the current analyst upgrade may indeed signal a turning point.