Oracle (ORCL) stock rose as much as 9% on Monday after Gil Luria at DA Davidson upgraded the stock to Buy from Neutral, keeping a $180 price target on the stock and arguing that the overhang from OpenAI is set to lift.
“We believe that a revamped OpenAI will return to its position as Google’s top challenger and with a fresh stack of capital be able to live up to its obligations this year, including to Oracle,” the firm wrote in a published Monday. “We believe this will remove the biggest concern from ORCL.”
In September, Oracle stock surged after the company revealed a massive increase in its contract backlog. Most of this increase was later revealed to be tied to OpenAI. Through the fall, investors soured on the stock amid both a perception that OpenAI had fallen behind in the AI race to Google — and to some extent Anthropic — and the scale of Oracle’s financial obligations related to meeting these future contracts came to light.
Oracle stock fell about 50% from its peak in September as fears rippled through the market. Even with Monday’s move, shares are still down about 10% this year.
Now, however, Luria and his team think the hate has gone too far, both towards Oracle and OpenAI.
“We are now more positive on OpenAI, based on changes in strategy, new frontier models, the pressure on Google’s competitors from its recent ascent, and progress on its fundraising efforts,” the firm wrote.
“Most importantly, we believe OpenAI already has as much as $40B of cash on hand and may be raising as much as another $100B by the end of the quarter, which should help pay for the data centers Oracle is building for OpenAI.”
Luria and team also noted a more recent decline in Oracle stock has been attributed to the overall souring on software stocks from investors, but believes this fear has gone too far as well.
“We believe companies will continue to pay for Oracle’s products and that they will not be vibe coded away,” DA Davidson wrote in its note.
The firm also noted that Oracle could see as much as $9 billion worth of upside related to its recent deal to take over hosting for TikTok USA, a deal that finally came through last month years of legal battles.