Oracle Under Pressure as AI Commitments Stretch the Balance Sheet

Oracle Corporation (NYSE:ORCL) is included among the 15 Dividend Stocks with Low Payout Ratios and Strong Upside.

The stock has failed to meet expectations. Shares are down 32% this quarter alone. According to a report by CNBC, Oracle Corporation (NYSE:ORCL) is on pace for its steepest decline since 2001 and the dot-com bust.

Investor confidence has weakened. Many now question whether the database software vendor can scale up enough server farms to support ChatGPT operator OpenAI, which agreed in September to spend more than $300 billion with Oracle.

Earlier this month, Oracle Corporation (NYSE:ORCL) posted quarterly revenue and free cash flow that came in below expectations. During the earnings call, newly appointed finance chief Doug Kehring laid out plans for $50 billion in fiscal 2026 capital expenditures. That figure is 43% higher than the September plan and roughly double what the company spent a year ago. The company is also lining up $248 billion in leases to expand cloud capacity, on top of new data center construction.

That level of expansion will require heavy borrowing. In September, Oracle Corporation (NYSE:ORCL) raised $18 billion through a jumbo bond sale, one of the largest tech debt offerings on record. Kehring said on the call that management remains committed to maintaining Oracle’s investment-grade rating. Some investors remain unconvinced. Credit default swap prices tied to the company’s debt have moved higher.

Analysts at D.A. Davidson wrote the following note to clients on December 12:

“Considering Oracle is already barely hanging on to an investment grade rating, we would be concerned about Oracle’s ability to live up to these obligations without restructuring its OpenAI contract.”

Oracle provides a fully integrated suite of cloud applications and cloud platform services, spanning infrastructure, databases, and enterprise software.

While we acknowledge the potential of ORCL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 13 Highest Paying Monthly Dividend Stocks to Buy and 10 Best Debt Free Dividend Stocks to Buy Now.

Disclosure: None.