Company Overview
Oracle has become the most controversial stock in enterprise tech, with shares plunging nearly 40% from September’s all-time highs above $320 down to around $205 today. The selloff came despite Oracle reporting one of the most stunning AI infrastructure wins in tech history: Remaining Performance Obligations (RPO) skyrocketed 359% year-over-year to $455 billion in fiscal Q1, driven primarily by a massive $300 billion five-year deal with OpenAI to provide compute capacity for ChatGPT and other AI initiatives.
Yesterday, December 3rd, Wells Fargo initiated coverage with an Overweight rating and $280 price target, representing 37% upside from current levels. The firm’s thesis is simple but powerful: Oracle’s cloud infrastructure market share could jump from 5% today to 16% by 2029, positioning it as one of the biggest share gainers in the AI cloud buildout. The timing couldn’t be more relevant – Oracle reports Q2 fiscal 2026 earnings on December 10th (next Tuesday), providing a critical checkpoint on whether the AI momentum is real or overhyped.
Key Technical and Fundamental Drivers
Fresh Wells Fargo Initiation → $280 Target Yesterday’s Overweight rating from Wells Fargo argues Oracle is “still early” in an AI-led reacceleration, with the 38% drawdown creating an attractive entry point for the long-term AI infrastructure story.
Massive AI Backlog → $455B in RPO Oracle’s $455 billion in Remaining Performance Obligations represents contracted future revenue visibility that few companies can match, with cloud infrastructure revenue surging 54% year-over-year in recent quarters.
Q2 Earnings Catalyst → December 10th Report Next Tuesday’s Q2 FY26 results will be critical, with investors watching for RPO conversion rates, cloud revenue acceleration, and updated commentary on the OpenAI partnership and debt financing plans.
OpenAI Partnership → $300B Five-Year Deal The cornerstone of Oracle’s AI thesis is providing compute infrastructure for OpenAI’s Stargate project, representing roughly $60 billion annually in cloud revenue once fully ramped.
Contrarian Setup → 38% Off Highs After trading above $320 in September, ORCL now sits around $205, with bearish sentiment creating potential for significant upside if the company demonstrates execution on its AI strategy.
Market Takeaway
Oracle represents one of the most polarizing bets in tech right now. Bulls point to the unprecedented $455 billion backlog, strategic partnerships with OpenAI and NVIDIA, and the opportunity to become the AI infrastructure backbone for the next decade. Bears worry about customer concentration risk (with OpenAI representing a huge portion of that backlog), the company’s aggressive debt load (over $105 billion and climbing), and whether Oracle can actually convert those contracts into profitable revenue at scale.
The Wells Fargo initiation yesterday signals that at least some on Wall Street believe the 38% drawdown has gone too far. The firm’s projection that Oracle can grow from 5% to 16% cloud infrastructure market share by 2029 would be transformative for a company still deriving significant revenue from legacy database licenses. With Deutsche Bank maintaining a $375 target and HSBC at $382, there’s a wide range of outcomes depending on execution. The December 10th earnings report becomes absolutely critical – investors will scrutinize RPO conversion rates, cash flow generation, commentary on the OpenAI relationship, and most importantly, management’s plan for financing the massive AI data center buildout without overleveraging the balance sheet. For contrarian traders willing to stomach volatility, the current setup offers significant asymmetry: if Oracle can demonstrate it’s converting that massive backlog into real revenue growth while managing debt prudently, the stock could re-rate substantially higher. The risk, of course, is that concentration concerns prove valid and the AI infrastructure boom proves shorter-lived than bulls anticipate.