Oracle's AI Ambition Faces Its Sternest Test: A Legendary Bear Just Piled In
Published on 08/09/2026 at 14:11 | Redaktion boerse-global.de
When Michael Burry closed out a profitable put position on Oracle on August 5, the natural assumption was that the famed contrarian had taken his winnings and moved on. He hadn't. The very next day, the investor best known for betting against subprime mortgages rebuilt the trade — this time via direct short sales of the stock. His thesis cuts to the heart of the AI infrastructure boom: Oracle, in his view, is depreciating its expensive graphics processors far too slowly, leaving the door open for painful writedowns down the line if the chips don't last as long as the balance sheet assumes.
That skepticism isn't coming out of thin air. The company's aggressive data center buildout has already taken a toll on its credit profile. Rating agencies have downgraded Oracle, leaving the stock just one notch above junk territory. The heavy debt load — a key reason S&P Global Ratings recently cautioned that leverage could climb toward 4.4x debt-to-EBITDA over the next two fiscal years, dangerously close to the 4.5x threshold that could trigger another downgrade — is the price of admission for competing in the AI arms race.
A Backlog That Keeps Growing
Yet for every bearish signal, Oracle keeps serving up a bullish counterpunch. The company recently locked in a ten-year contract with the U.S. Department of Defense valued at up to $7.0 billion, with a base value of $3.31 billion. That came on the heels of another ten-year award: the Office of Personnel Management tapped an Oracle-led team — alongside CACI International, Deloitte, and Baker Tilly — for a $400 million federal HR modernization project built on Oracle Fusion HCM.
The result is a record backlog of $638.0 billion as of the end of fiscal 2026, fueled by infrastructure demand from OpenAI, Meta, and xAI. That order book represents a multiple of annual revenue, a level of visibility few competitors can match. For bulls, it's the single most compelling argument that the AI story is real — not just announcement rhetoric.
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The Cost of Keeping Pace
But growth doesn't come free, and at Oracle the bill is becoming increasingly visible. The company posted negative free cash flow of $23.7 billion in fiscal 2026 and plans to raise roughly $40.0 billion through a mix of debt and equity to fund its AI data center expansion. UBS maintained its "Buy" rating on Friday but slashed its price target from $285 to $245, citing the capital intensity of AI infrastructure and risks to return on invested capital.
The company brought in Hilary Maxson as its new CFO in April 2026, poaching her from Schneider Electric, where she ran global finance. Her mandate: reconcile the investment offensive with strict cost discipline without choking off growth. It's a delicate balancing act, and the market is watching closely.
A Market Torn Between Momentum and Caution
The stock's recent action reflects this tension. Shares climbed 12.84% over the past week, closing Friday at €127.10 after a 2.27% daily gain. But the longer-term picture remains bruised: the stock sits 56.89% below its September record high and 7.79% beneath its 50-day moving average. From the 200-day average, it's still nearly 17% off — a sign that the recent rebound hasn't come close to repairing the broader downtrend. With annualized volatility near 60%, sharp swings in both directions look likely to continue.
Institutional investors, meanwhile, appear unfazed by the balance sheet concerns. Recent regulatory filings show Avity Investment Management built a new position of 127,037 shares, while Valeo Financial Advisors increased its stake by 4.6% to 80,686 shares. Modest positions, to be sure, but a signal that some market participants remain committed to the AI narrative despite the risks.
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What Comes Next
The coming week brings a heavy slate of U.S. economic data — consumer prices on Wednesday, producer prices on Thursday, and retail sales on Friday. Any surprise could move capital-intensive tech names like Oracle disproportionately, given how closely the data center buildout depends on financing conditions.
The first fiscal quarter 2027 earnings are due September 14, with consensus revenue at $19.13 billion. That report will offer the first real look at whether Burry's depreciation concerns have merit — and whether the company's massive backlog can continue to offset the weight of its growing debt. Analysts remain broadly optimistic, with an average price target of €214.63 implying roughly 69% upside from current levels. But as Oracle's own actions suggest — the company's OpenJDK project recently imposed a temporary ban on AI-generated code in Java community contributions, citing copyright and IP risks — even the most enthusiastic AI adopters understand the need for caution. The commercial push and the governance guardrails are running in parallel, and investors are left to decide which one ultimately wins out.
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