Oracle Corporation experienced a significant uptick in its stock price on Monday, climbing as much as 9%. This surge followed an upgrade from Gil Luria at DA Davidson, who shifted the stock’s rating from Neutral to Buy while maintaining a target price of $180. Luria indicated that concerns surrounding OpenAI—an entity that has become increasingly entwined with Oracle’s fortunes—are expected to subside soon.
DA Davidson’s analysis suggests that a revitalized OpenAI is positioned to reclaim its status as a leading competitor to Google, backed by substantial capital influx. The firm noted, “We believe that a revamped OpenAI will return to its position as Google’s top challenger and with a fresh stack of capital, be able to live up to its obligations this year, including to Oracle.” This perspective is seen as a key factor in alleviating some of the most pressing concerns regarding Oracle’s stock performance.
In September, Oracle’s stock had initially soared after the company reported a substantial increase in its contract backlog, much of which was later linked to OpenAI. However, investor sentiment deteriorated as perceptions emerged that OpenAI was lagging in the AI competition against Google and Anthropic. This contributed to Oracle shares following a downward trajectory, resulting in a nearly 50% decline from their September peak, as anxiety about Oracle’s financial commitments to impending contracts came to the forefront. Even with Monday’s gains, Oracle’s stock remains down about 10% year-to-date.
Luria and his team believe that the negative sentiment toward both Oracle and OpenAI has been exaggerated. They noted several positive developments, including OpenAI’s internal strategy shifts, innovative models, intensified competitive pressure on Google, and the firm’s ongoing fundraising efforts. They estimate that OpenAI may currently have around $40 billion in cash reserves and could raise an additional $100 billion by the end of the quarter, funds that could be instrumental for financing data centers Oracle is constructing for OpenAI.
Additionally, the recent decline in Oracle’s stock is attributed to an overall negative sentiment toward software stocks, a situation that Luria argues has been overstated. DA Davidson expressed confidence that businesses will continue to invest in Oracle’s offerings, stating, “We believe companies will continue to pay for Oracle’s products and that they will not be vibe coded away.”
The firm is also optimistic about Oracle’s prospects stemming from its recent strategic deal to manage hosting for TikTok USA, a project that has finally materialized after prolonged legal disputes. This agreement could yield up to $9 billion in potential benefits for Oracle, marking a significant opportunity for growth as the company navigates the evolving tech landscape.
