Oracle’s Critical Juncture: Balancing AI Promise Against Debt Concerns

Oracle Corporation finds itself at a pivotal moment as conflicting analyst perspectives and concerning debt signals create market uncertainty. The technology giant's shares have retreated significantly from their September peaks, leaving investors questioning whether the artificial intelligence opportunity has stalled before reaching its full potential.

Fixed-income specialists at Morgan Stanley have identified troubling indicators within credit markets. The cost of insuring against Oracle's potential default, measured through Credit Default Swaps, has surged to its highest level in three years, approaching concerning thresholds last witnessed during the 2008 financial crisis.

This credit market anxiety stems from Oracle's substantial borrowing strategy. The company has accumulated over $56 billion in debt to accelerate the construction of data centers required for its AI infrastructure expansion. Market observers worry this substantial financial leverage could become burdensome if technological evolution renders these expensive facilities obsolete faster than anticipated.

Deutsche Bank Maintains Bullish Outlook

Contrasting the debt concerns, Deutsche Bank research analysts maintain a strongly optimistic position. They've established a price target of $375 per share, suggesting nearly 100% upside potential from current levels. Their analysis indicates the market is completely overlooking the significant opportunity presented through Oracle's collaboration with OpenAI.

Should investors sell immediately? Or is it worth buying Oracle?

Even under conservative modeling that assumes potential partial loss of OpenAI-related business, Deutsche Bank strategists contend current valuations remain unjustified. They argue the stock currently trades as if the AI division generates minimal value—a substantial miscalculation given projected cash flow generation in coming years.

December 8: The Pivotal Date

Investor apprehension is clearly reflected in share price performance. Friday's closing price of €173.56 leaves the equity trading approximately 40% below its 52-week high.

All attention now focuses on December 8, when Oracle management will present quarterly results. The company must outline a coherent financing strategy for its substantial AI ambitions during this presentation. Should executives successfully address liquidity concerns, shares could initiate a recovery trajectory. Failure to provide convincing reassurances, however, may deliver a harsh reality check to optimistic investors.