DA Davidson has upgraded Oracle to a buy, arguing that investors have overreacted to recent concerns about artificial intelligence spending and software stocks, and that improving clarity around OpenAI’s funding outlook could unlock significant upside for the company.
Oracle shares rose 9.2% to $155.95 in early trading on Monday following the upgrade, though the stock remains far below its record high of $328.33 reached in September.
Analyst Gil Luria said the recent selloff had gone too far and that sentiment toward Oracle’s AI exposure was beginning to stabilise.
“Considering Oracle’s move from $345 intraday Sept. 11 to the current $143 and subsequent moves down in Nvidia and Microsoft tied to OpenAI concerns, we believe the market has overshot to the downside,” Luria said, upgrading the stock from neutral to buy and maintaining a price target of $180.
Oracle shares had fallen roughly 25% over eight trading sessions last week, weighed down by a broader software selloff and concerns over AI-related debt.
OpenAI funding seen as key catalyst
Luria argued that investors should reassess Oracle in light of OpenAI’s strengthening financial position.
He estimates that OpenAI already has around $40 billion in cash and could raise as much as another $100 billion by the end of the quarter, funds that would help pay for data centres Oracle is building for the AI company.
“Since the market is currently assigning the OpenAI relationship a negative value, we believe the fundraise will serve as a catalyst for outperformance,” Luria said.
“In the past we had been very critical of Oracle and OpenAI, but believe the market is now more appropriately reflecting the risks involved,” he wrote.
TikTok USA stake adds underappreciated upside
While most investor attention has focused on Oracle’s AI infrastructure ambitions, DA Davidson highlighted the company’s stake in TikTok USA as another potential growth driver.
Oracle owns a 15% stake in the new entity and generated an estimated $800 million in revenue from TikTok USA last year.
The arrangement could pave the way for a deeper partnership with ByteDance and secure TikTok USA as a long-term cloud customer.
Oracle may have also acquired its stake at a relatively low valuation, after US Vice President JD Vance said TikTok USA would be valued at around $14 billion.
Core software business remains resilient; AI fears overstated
Luria argued that Oracle’s core software business continues to anchor its valuation and that fears about AI eroding demand for enterprise software are overstated.
“We believe companies will continue to pay for Oracle’s products and that they will not be vibe coded away,” he said.
However, he cautioned that Oracle’s investment story remains complex.
The company plans to raise up to $50 billion this year, including through a new equity issuance, which could weigh on the stock in the near term.
“Oracle is far from a clean story,” Luria said, adding that the planned equity issuance could create selling pressure for several weeks.
He also pointed to Oracle’s heavy financial obligations, including roughly $130 billion in debt and $248 billion in operating lease commitments.
“The company has put itself in a very precarious position and will have to execute well to get out of this predicament,” Luria said.
AI momentum at OpenAI adds to the narrative
Signs of renewed momentum at OpenAI could further shape investor sentiment toward Oracle.
OpenAI chief executive Sam Altman recently told employees that ChatGPT has returned to exceeding 10% monthly growth, according to an internal message viewed by CNBC.
The company is also preparing to launch an updated chat model this week.
For Oracle, the coming months are likely to be defined by the balance between AI-driven growth opportunities and financial risks.
While DA Davidson believes the market has become too pessimistic about the company’s prospects, it also underscores that Oracle’s future performance will depend on its ability to execute amid unprecedented capital demands and rapid technological change.
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