Oracle: Strong Generative AI Demand Supports Data Center Buildout
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Key Morningstar Metrics for Oracle
Oracle ORCL shares rose more than 10% on Feb. 9, posting its biggest daily gain since last September, after a sell-side competitor issued a more favorable rating. Despite the rally, Oracle stock was still down 19% year-to-date, underperforming enterprise-software peers such as SAP and Microsoft.
Why it matters: We attribute Oracle’s jump to the positive reception of OpenAI’s GPT-5.3-Codex tool and other tech giants’ expanded capital expenditure plans. Amazon, Alphabet, Microsoft, and Meta are all increasing their capital expenditures by 60%-100% in 2026, in line with our 70% forecast for Oracle.
- With an estimated monthly active user base of over 1 billion, ChatGPT’s leadership in the large language model market is solid. OpenAI is also gaining traction among enterprises. The company’s API business, with a smaller base, saw faster growth than ChatGPT in 2025.
- Positive usage trends should back our thesis that OpenAI’s $300 billion mega bookings can meaningfully accelerate Oracle’s revenue growth to an average of 32% over the next five years. OpenAI’s $100 billion funding round also provides vital resources for its obligations.
The bottom line: We maintain our $277 fair value estimate for wide-moat Oracle, as strong demand for generative artificial intelligence supports the company’s data center buildout. Shares appear undervalued, but our Very High Morningstar Uncertainty Rating indicates the investment opportunity is highly risky.
- Despite a healthy demand environment, Oracle still faces multiple challenges, including managing its debt leverage and sourcing the necessary GPUs, to deliver all the data center capacities on time and turn bookings into revenue.
Between the lines: Oracle’s late entry to the cloud computing market actually gave it an opportunity to build a differentiated infrastructure optimized for AI workloads. With bare metal at its foundation, OCI servers can provide better performance in model training than AWS, Azure, and Google Cloud.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article.
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