TMTPOST -- Oracle Corportaion shares surged as much as 6.6% Wednesday midday before trimming gains to under 5%, rebounding from Tuesday's lowest close since June 11 as major investment banks stepped in to defend the stock against bearish concerns over artificial intelligence (AI) infrastructure spending. The rally positioned Oracle for its strongest single-day performance since October 13, with the stock having tumbled nearly 30% over the past month as investors questioned the company's massive OpenAI commitment and data center obligations.
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Deutsche Bank and HSBC both maintained bullish ratings this week, arguing that bearish fears are overdone and that the market is giving Oracle little to no credit for its OpenAI business at current levels around $200 per share. Both banks see upside of over 90% from Tuesday's close, with their price targets suggesting Oracle could surpass its September closing high by more than 10%.
The defense comes as Oracle's $500 billion in remaining performance obligations (RPO)--including a reported $300 billion commitment from OpenAI-- has rattled investors worried about the company's ability to execute while managing heavy lease commitments.
RPO represents the total value of contracted products and/or services that are yet to be delivered to a company's customers. It is becoming a key metric to understand tech giants' future real revenue, growth quality, and potential risks amid the AI spending spree.
Concerns have mounted over Oracle's negative free cash flow of approximately $5.9 billion, its highest debt levels in decades, and thin margins in its cloud business.
Deutsche Bank: The Bear Case "Looks Bullish"
Deutsche Bank reiterated its Buy rating and $375 price target, with analyst Brad Zelnick arguing that recent stock weakness represents an attractive entry point. Zelnick′s analysis showed that even excluding all OpenAI−related revenue, Oracle′s fiscal year 2030 earnings per share (EPS) would decline only from $21 to $17, with free cash flow dropping from $41 billion to $31 billion.
The firm calculated that even accounting for potential lease burdens tied to unused AI capacity, Oracle's FY30 EPS would still reach around $15 with free cash flow of approximately $26 billion. Based on the current share price around $200, Zelnick argued the market is giving Oracle "little, if any, credit" for its OpenAI business, making what appears to be a bearish scenario actually look bullish.
HSBC Maintains Strong Conviction Despite Uncertainty
HSBC kept its Buy rating and $382 price target, implying more than 90% upside potential from Tuesday close. The firm played down concerns over $500 billion in RPS, noting that markets have been "filling in the blanks with little concrete information," creating unnecessary panic.
HSBC called Oracle's guidance for a 30-40% gross margin on its AI infrastructure business for fiscal year 2030 reasonable, noting that combining lower-margin cloud services with slower-growing software "is math." The firm believes Oracle is "skillfully planning to meet these commitments" and executing on its strategy, arguing that the AI infrastructure investments represent front-loaded expenses with revenue coming later.
DA Davidson Strikes Cautious Note
Not all analysts share the optimism. DA Davidson lowered its price target to $200 from $300 while maintaining a Neutral rating, questioning Oracle's transparency around its OpenAI deal. The firm noted that when Oracle reported earnings in September, the company suggested several customers accounted for the increase in remaining performance obligations, yet the next day it emerged that OpenAI accounted for almost the entire increase.
DA Davidson observed that OpenAI's $300 billion commitment to Oracle was by far its biggest, initially making Oracle appear to be "the winner of a bake-off." However, with more than a trillion dollars of commitments announced subsequently, the firm concluded that OpenAI was "not a serious counterpart" and that Oracle was "a pawn in the grand game of 'fake it till you make it.'"
Investor Concerns and the Buy-the-Dip Debate
The stock's 30% decline over the past month has stemmed from multiple concerns. Oracle's debt load has surged dramatically through billions in new bonds and large loans, pushing its debt-to-equity ratio well above industry norms. The company's negative free cash flow has raised questions about its ability to service debt while investing in growth, with credit-default swap costs climbing to two-year highs.
Despite these worries, some investors see the selloff as overdone. Technical indicators suggest Oracle is oversold, a classic signal that a rebound could be near. Supporters of a buy-the-dip approach point to Oracle's substantial backlog of AI and cloud contracts, which could generate significant revenue if execution holds. Of 45 analysts covering Oracle, 32 rate it Buy or higher, suggesting the analyst community remains largely positive on the stock's prospects.
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