Analyst Explains What 'Caught' His Attention About Oracle (ORCL)- 'Late-90s Kind of Vibes'

We recently published Top 10 Trending Stocks Everyone’s Watching in Q4. Oracle Corp (NYSE:ORCL) is one of the trending stocks everyone's watching.

Morningstar’s Dave Sekera said in a recent program on Schwab Network that Oracle’s eye-popping guidance caught his attention. Here is why:

“Well, it’s funny. So, on my podcast a couple weeks ago, I was joking, you know, with my co-host there that I’m starting to get kind of these, you know, mid 90s, late 90s kind of vibes. Really what caught my attention was Oracle Corp (NYSE:ORCL) when they came out with their guidance for their cloud business doing 10 billion of revenue last year, doing 17 to 18 billion this year but increasing it 14-fold by 2030 to 144 billion, really just an eye-opener. And again, it’s not like there aren’t other people—you’ve already got Amazon, you’ve got Microsoft, you got Google in that cloud business as well, so already a lot of competition. So when I’m seeing those kinds of numbers put up out there, really trying to understand how much revenue, how much efficiency is there going to be over the course of the next decade to really support the amount of capital that we’re putting in there today. So, to some degree, when I’m looking at our AI names, based on our base case, they’re pretty fully valued.”

Headwaters Capital Management stated the following regarding Oracle Corporation (NYSE:ORCL) in its third quarter 2025 investor letter:

“The catalyst for the September AI trade was Oracle Corporation’s (NYSE:ORCL) announcement of a 5-year contract with OpenAI for $300B (implying annual contract value of $60B) to host the company’s LLMs at Oracle data centers beginning in 2027. While the market has grown desensitized to these large headline numbers, it’s useful to step back and put these figures into context from the perspective of both the magnitude of spending and return on investment. It’s easiest to start with the amount of investment that five companies are collectively spending on AI. The table below outlines CAPEX spending by the five hyperscalers and compares it with the other 495 companies in the S&P 500. In 2026, these five hyperscaler companies are expected to spend $405B of CAPEX, nearly all of this related to AI infrastructure build.

In terms of the economics around this investment, details have emerged from the Oracle-OpenAI announcement that can help investors begin to untangle the economics of these contracts. It’s easiest to unpack this from the perspective of each of the players involved.

Committed to spending $60B annually with Oracle to host the Company’s LLMs. This annual expense represents the Company’s cost of goods sold for running LLMs. OpenAI is on track to generate $13B of revenue in 2025 (Source: Reuters and the Information). So just to cover the cost of operating their LLMs on this single contract, OpenAI needs revenue to grow 4.6x in 2 years, or a +115% CAGR over the next 2 years. This is a single contract for hosting services. OpenAI has numerous other hosting contracts, implying that the company needs revenue to significantly exceed $60B just to cover the company’s total cost of goods sold…” (Click here to read the full text)

While we acknowledge the potential of ORCL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

Disclosure: None. This article is originally published at Insider Monkey.