Oracle stock has risen in recent weeks, partially due to the TikTok deal and reduced pessimism about its debt and exposure to OpenAI. The selling pressure appears to have been excessive.
The stock fell 45% from peak to trough but now trades at 30 times forward price-to-earnings after bouncing from lows around $178 per share.
OpenAI owes Oracle hundreds of billions of dollars related to AI data center construction. OpenAI's planned capital raises or an initial public offering in 2026 could validate Oracle's remaining performance obligations.
Recently, OpenAI acquired Torch for $100 million and launched OpenAI Health, expanding monetization into healthcare. These moves are viewed favorably for Oracle.
Investors are gaining confidence in OpenAI's ability to meet its financial commitments. As OpenAI introduces new AI innovations and enters additional industries, the likelihood increases that Oracle's large contracts will generate substantial revenue.
Oracle is positioned to quickly deploy the latest Nvidia Vera Rubin chips, providing a significant advantage to customers like OpenAI. The company's networking expertise and Oracle Acceleron RoCE fabric enable efficient, low-latency supercluster construction.
Analyst Jefferies has set a price target of $400 per share for Oracle. Some believe the stock is undervalued at approximately $200, considering that concerns about debt and OpenAI exposure may have been overstated.