Oracle $ORCL ( ▲ 7.58% )is taking heat for going all-in on AI. The stock is down roughly 45 percent from its October highs as investors recoil at the scale of the company’s data center spending and the debt that comes with it. But beneath the panic, some analysts think the selloff is starting to look overdone.
Oracle told investors it plans to spend about $50 billion this fiscal year on AI data centers, a 40 percent jump from last year and well above what Wall Street expected. That number alone was enough to rattle markets, especially with Oracle’s total debt already north of $100 billion and another large bond sale rumored to be on the way.
The Debt Panic Button
Bond investors are clearly nervous. The cost to insure Oracle’s debt against default has surged to around 144 basis points, a multiyear high. In plain English, it is now much more expensive to bet that Oracle will stay on solid financial footing. Add in softer near-term growth guidance and a still ongoing dividend payout, and the market’s anxiety starts to make sense.
The biggest fear is timing. Oracle is spending aggressively today, but the revenue from those data centers arrives later. That gap between cash out the door and cash coming back in is what has investors hitting sell.
Why Some Analysts Are Pushing Back
Not everyone is buying the doom narrative. Bank of America points out that AI demand remains strong and that Oracle’s cloud architecture lets it serve a wide range of customers and chip configurations. Gimme Credit analysts add that most of Oracle’s spending is on late-stage equipment purchases, meaning revenue tends to follow relatively quickly once projects go live.
That matters because Oracle’s backlog is massive, roughly $523 billion, even if a meaningful chunk is tied to OpenAI. If those contracts convert as expected, margins could improve sharply in the back half of the fiscal year.
The Big Picture
Oracle is in the most capital intensive phase of its AI buildout, and markets hate uncertainty. But if spending translates into revenue faster than feared, today’s selloff may end up looking less like a warning sign and more like a reset.