The tale of Oracle’s stock in 2025 is really two stories running on parallel tracks that rarely intersect. One track belongs to equity analysts, who still see the shares roughly doubling from current levels. The other belongs to bond investors, who have been pricing in growing financial distress for months. The gap between these two views has seldom been wider — and it all hinges on a single customer.
At the center of the drama is Oracle’s commitment to supply OpenAI with computing capacity worth $300 billion over five years, along with managing its core facility in Abilene, Texas. That deal has swollen the company’s backlog to roughly $553 billion at the end of the fiscal third quarter on February 28, a 325% surge from a year earlier. Yet the same relationship has become the focal point of credit-market anxiety, because about half of those unfulfilled orders come from one unprofitable client. If OpenAI’s business model wobbles, Oracle’s visibility on future revenue collapses.
The credit markets have been sounding alarms well before the stock market took notice. Oracle’s credit-default swaps, effectively insurance against default, climbed to a record 198.23 basis points, implying a default probability of roughly 16% — extraordinary for an investment-grade issuer. S&P Global Ratings stoked the fire on July 9 by downgrading Oracle’s long-term rating from BBB to BBB-, just one notch above junk. The agency cited the sheer scale of capital spending: Oracle poured $55.7 billion into investments in fiscal 2026, while free cash flow swung to negative $23.7 billion. Operating cash flow did improve 54% to $32 billion, but it was nowhere near enough to cover the build-out.
The stock market, meanwhile, appears to have only recently woken up to these risks. Shares slid to 106.42 euros on the latest session, a daily loss of 3.74%, putting them just 1.26% above the 52-week low of 105.10 euros. That leaves the stock down roughly 36% year-to-date. The 14-day relative strength index has plummeted to 26.9 — deep into oversold territory — while the 30-day annualized volatility has jumped to 47.47%, a sign of how violently sentiment is swinging.
Should investors sell immediately? Or is it worth buying Oracle?
The disconnect between equity and credit markets is not new, but it has become impossible to ignore. Even with the stock near its floor, the average analyst price target still stands at 220.61 euros, more than double the current price. Yet bond investors have been steadily widening Oracle’s CDS spreads since last year, and the spread did not compress even when the stock was rallying in early 2025. Credit markets, by nature, follow hard data — cash generation, leverage, repayment capacity — not narratives.
A fresh headwind arrived in the form of Kimi K3, a Chinese AI model from startup Moonshot AI, whose launch triggered a broader tech sell-off. For Oracle, the event was a double blow: it hit both the equity and the credit side. Institutional investors have begun questioning the “grow through cash burn” model more intently now that cheaper AI alternatives can compete.
Technical measures underscore how far the stock has fallen. The 50-day moving average sits at 152.58 euros and the 200-day average at 162.22 euros — both indicating a deep chart breakdown. But the stock trades at roughly 16 times the earnings Oracle itself has guided for the current fiscal year, a multiple that some see as pricing in a lot of bad news already.
What could turn the tide? Two things: evidence that free cash flow is stabilizing, and proof that OpenAI is making good on its commitments quarter by quarter. Oracle has announced plans to raise about $40 billion this fiscal year through debt and equity, including a $20 billion share program. S&P estimates the free cash deficit could widen to $42 billion next year unless spending is cut or more capital is raised. For investors with strong conviction in sustained AI demand, a small position near current levels might make sense — but only if OpenAI keeps paying its bills. The credit markets, as ever, will be watching the cash flow statements long before the headlines.
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