DA Davidson has raised its recommendation on Oracle Corporation (NYSE: ORCL) from Neutral to Buy, maintaining a $180 per-share price target.
The research firm pointed to expectations that a reorganized and recapitalized OpenAI will reemerge as the principal competitive force against Google in the artificial intelligence arena. DA Davidson said that with fresh funding, OpenAI should be able to meet its contractual obligations this year, including commitments tied to Oracle.
According to the analyst, the prospect of OpenAI securing the capital it needs removes what the firm regards as the single largest concern weighing on Oracle's business outlook. Despite the improved rating, DA Davidson left its $180 target unchanged as it moved the recommendation to Buy from its prior Neutral stance.
Those analyst views come amid significant capital markets activity at Oracle. The company launched a $20 billion at-the-market equity program and completed a $25 billion debt issuance. Oracle disclosed an equity distribution arrangement that names several financial institutions as sales agents to facilitate the sale of common shares.
Market participants have responded to Oracle's capital moves in different ways. Citizens Investment Research trimmed its price target on Oracle to $285 but retained a Market Outperform rating. BMO Capital Markets lowered its target to $205, explicitly citing Oracle's recent capital raising - via both debt and equity channels - as the rationale. BMO also highlighted notably strong market demand for Oracle's debt, saying demand far exceeded the $25 billion offered.
Separately, banks are searching for new purchasers for billions of dollars of loans tied to Oracle's data center construction projects. Those loans, described as investment-grade, are connected to a larger $300 billion arrangement with OpenAI, according to the information cited.
Regulatory and community scrutiny has also surfaced. Michigan Attorney General Dana Nessel criticized the companies' data center power plan and characterized Oracle and OpenAI as "untrustworthy." Nessel filed a motion seeking reconsideration of the approval granted for DTE Energy to supply power to the data center, arguing that the conditions intended to protect customers were not fully accepted.
Taken together, DA Davidson's rating change reflects a view that improved funding prospects for OpenAI reduce a key risk to Oracle, even as the company pursues large-scale equity and debt financing and navigates loan syndication and regulatory challenges tied to its data center work.
Key points
- DA Davidson upgraded Oracle to Buy from Neutral and maintained a $180 price target - impacting equity investors and enterprise software market perceptions.
- Analysts point to new capital for OpenAI as the catalyst that should allow the AI developer to honor commitments to Oracle, addressing a critical business concern - relevant to AI and cloud infrastructure sectors.
- Oracle's financial moves include a $20 billion at-the-market equity program and a completed $25 billion debt issuance; banks are seeking buyers for loans tied to Oracle's data center construction - affecting banking and corporate finance activities.
Risks and uncertainties
- Capital markets response and investor sentiment around Oracle's combined debt and equity raises could continue to influence price targets and analyst views - a market-facing risk for equity and credit investors.
- Banks are attempting to reallocate billions in loans linked to data center construction, which introduces financing and liquidity uncertainty for those projects - a risk for lenders and project financing markets.
- Regulatory scrutiny over the data center power arrangement in Michigan, including a motion by the state attorney general, represents operational and permitting uncertainty that could affect project timelines and local stakeholder relations.