Concerns of a Bubble Rise Following Oracle's Surge Linked to OpenAI Agreement: An AI 'House of Cards'
Written by Emily J. Thompson, Senior Investment Analyst
Source: CNBC
Updated: Sep 14 20250mins
Concerns Over Oracle's Deal with OpenAI: Skepticism is rising regarding Oracle's multiyear agreement with OpenAI, which involves a $300 billion commitment for computing power, as OpenAI has yet to report a profit and relies heavily on this single customer for its financial outlook.
Market Reactions and Analyst Opinions: Despite Oracle's recent stock surge, analysts express caution due to customer concentration risks and the unclear financial viability of OpenAI, with some maintaining neutral ratings on Oracle's stock amid concerns about its high leverage and cash position compared to competitors.
Potential AI Bubble: Experts warn that the rapid rise in Oracle's stock may indicate a peak in the AI bubble, highlighting vulnerabilities in OpenAI's business model and the speculative nature of the interconnected AI ecosystem reliant on partnerships and infrastructure investments.
Financial Comparisons and Risks: Oracle's cash reserves are significantly lower than major competitors like Microsoft and Alphabet, raising questions about its ability to sustain operations and fulfill its commitments, especially as it faces challenges in securing necessary hardware and managing debt.
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Analyst Views on ORCL
Wall Street analysts forecast ORCL stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ORCL is 352.52 USD with a low forecast of 175.00 USD and a high forecast of 415.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
37 Analyst Rating
25 Buy
11 Hold
1 Sell
Moderate Buy
Current: 198.850
Low
175.00
Averages
352.52
High
415.00
Current: 198.850
Low
175.00
Averages
352.52
High
415.00
JPMorgan
Mark Murphy
Neutral
downgrade
$270 -> $230
2025-12-11
New
Reason
JPMorgan
Mark Murphy
Price Target
$270 -> $230
2025-12-11
New
downgrade
Neutral
Reason
JPMorgan analyst Mark Murphy lowered the firm's price target on Oracle to $230 from $270 and keeps a Neutral rating on the shares. The firm views the company's fiscal Q2 report as "mixed," with "modest" sales and operating-income shortfalls. However, Oracle continues to advance its position as one of the key beneficiaries of large-scale artificial intelligence infrastructure demand, the analyst tells investors in a research note. JPMorgan cites higher execution risk from the multi-year trajectory for Oracle Cloud and "pressured" free cash flow forecasts for the target cut.
Barclays
Raimo Lenschow
Overweight
downgrade
$330 -> $310
2025-12-11
New
Reason
Barclays
Raimo Lenschow
Price Target
$330 -> $310
2025-12-11
New
downgrade
Overweight
Reason
Barclays analyst Raimo Lenschow lowered the firm's price target on Oracle to $310 from $330 and keeps an Overweight rating on the shares following the fiscal Q2 report. The firm says the company missed expectations in key areas, which will heighten the debate around Oracle and drive the shares lower in the short-term. There were new variables introduced that will create challenges for the stock, including new financing and deployment options, the analyst tells investors in a research note.
Stifel
Brad Reback
Buy
downgrade
$350 -> $275
2025-12-11
New
Reason
Stifel
Brad Reback
Price Target
$350 -> $275
2025-12-11
New
downgrade
Buy
Reason
Stifel analyst Brad Reback lowered the firm's price target on Oracle to $275 from $350 and keeps a Buy rating on the shares following what the firm calls "a lackluster print." Modestly better RPO growth was "more than offset" by much higher than anticipated capex including a $15B increase in FY26 guidance and continued uncertainty around exactly how Oracle is going to fund its data center build-out requirements, the analyst tells investors in a post-earnings note.
BMO Capital
Outperform
to
NULL
downgrade
$355 -> $270
2025-12-11
New
Reason
BMO Capital
Price Target
$355 -> $270
2025-12-11
New
downgrade
Outperform
to
NULL
Reason
BMO Capital lowered the firm's price target on Oracle to $270 from $355 but keeps an Outperform rating on the shares after its Q2 results. The quarter was lackluster from a revenue perspective, particularly in Cloud Services, though operating cash flow was a positive, the analyst tells investors in a research note. The company is closely tied to OpenAI performance, which creates some risk longer term given the size of the commitments, but the firm remains positive on its positioning in cloud and AI as well as its full stack application offering, including database, as more enterprise AI workloads move to production, BMO added.
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About ORCL
Oracle Corporation offers integrated suites of applications plus secure, autonomous infrastructure in the Oracle Cloud. The Company operates through three businesses: cloud and license, hardware and service. Its cloud and license business is engaged in the sale, marketing and delivery of its enterprise applications and infrastructure technologies through cloud and on-premise deployment models including its cloud services and license support offerings, and its cloud license and on-premise license offerings. Its hardware business provides infrastructure technologies including Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments. Its services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications and infrastructure technologies.
About the author
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Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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