Oracle Corporation (ORCL) has recently faced a severe stock sell-off, with shares plummeting nearly 55% from their all-time high of $345.72 in late 2025 to around $160. The significant drop can be attributed to deep investor concerns over the companys ambitious yet risky foray into AI infrastructure combined with a heavy debt load.
The alarm bells began to ring back in September 2025 when Oracle inked a staggering $300 billion deal with OpenAI. This five-year agreement mandates Oracle to deliver an impressive 4.5 gigawatts of annual computing power capacity to the creator of ChatGPT, covering the period from 2027 to 2032.
While this partnership establishes Oracle as an essential player in the AI infrastructure market, it has also fostered significant concentration risk. As of now, a striking 58% of Oracle’s contractual backlog is tied to OpenAI, rendering the company somewhat of a vital “publicly traded proxy” for the fortunes of the AI startup, as reported by several financial analysts.
However, OpenAI itself is not without its challenges. New estimates indicate that the company might burn through an eye-watering $115 billion by 2029. Such potential cash depletion raises pertinent questions about whether OpenAI can fulfill its long-term financial commitments to Oracle.
Moreover, Oracle has recognized that it cannot solely depend on client spending to fuel its ambitious projects. In February, the tech giant announced plans to raise between $45 and $50 billion in 2026 through a combination of debt and equity financing to support its ongoing capital projects. Notably, approximately half of this raise is expected to come from equity issuance, including $20 billion in common shares.
Managing a Heavy Debt Load
This new influx of capital will only add to Oracle’s already substantial debt burden, which was reported at around $100 billion in the fiscal second quarter ending November 2025. This hefty debt load will likely translate into increased interest expenses, placing additional strain on the companys bottom line for years to come.
In light of these developments, Bernstein analysts revised their outlook for Oracle on February 9, adjusting the price target down from $339 to $313, while maintaining an Outperform rating. Their analysis suggests that the planned capital raise should adequately satisfy Oracle’s financial requirements through fiscal year 2028, though lingering uncertainties about returns from these significant investments remain a concern for investors.
Another factor contributing to investor concerns includes trading activity by Oracle’s CEO, Clayton Magouyrk, who recently sold 10,000 shares at an average price of $155.23, amounting to $1.55 million in sales. Magouyrk still retains a substantial stake, holding 134,030 shares after the transaction.
OpenAI’s Competitive Landscape
OpenAI is also feeling the effects of increasing competition. Reports indicate that the market share of ChatGPT has dramatically fallen from 69.1% in January 2025 to just 45.3% by January 2026. This rapid decline raises critical questions about OpenAI’s capacity to maintain its market dominance against formidable rivals such as Anthropic and Google’s Gemini.
Although Oracle’s portfolio does include other high-profile clients like TikTok and Nvidia, the heavy reliance on OpenAI significantly ties Oracle’s success to the fortunes of a single client and the scalability of generative AI.
Current market evaluations show Oracle trading at a forward price-to-earnings ratio of 20, below the Nasdaq 100 average of 27. This apparent discount may not merely present a buying opportunity, but rather reflect substantial execution risks associated with the firm.
In its fiscal second quarter report from November, Oracle showcased solid growth in cloud infrastructure revenue, highlighting the strength of its database management and cloud computing services. However, the question remains whether Oracle’s vast capital expenditures will translate into profitable growth or simply add to the company’s legacy as stranded assets.
Bernstein estimates that the planned $45-$50 billion capital raise will adequately fund Oracles AI infrastructure goals through fiscal 2028, providing the company with a pivotal two-year window to validate its ambitious strategy.
