Can Oracle Deliver on Its OpenAI Bet? Moody’s Turns Skeptical Over All-In Cloud Gamble

TradingKey - After securing a $300 billion deal with OpenAI, Oracle — newly thrust into the AI spotlight — saw its stock surge 36%, only to retreat about 10% over the following week. This volatility reflects investor concerns about the actual feasibility of fulfilling the contract, including Oracle’s capacity to deliver and OpenAI’s ability to pay.

On Thursday, September 18, Oracle’s stock fell 1.59%, marking its fourth decline in the past six trading sessions and sitting roughly 10% below its peak on September 10.

The turbulence stems from massive orders, including one from OpenAI, disclosed during Oracle’s Q1 FY2026 earnings call, where it reported Remaining Performance Obligations (RPO) soaring to $455 billion.

Wall Street analysts reacted with initial excitement followed by caution. The “excitement” came as major banks like Citi and Bank of America raised price targets. The “concern” centers on whether Oracle can monetize long-term contracts and whether its clients — especially OpenAI — can actually afford them.

On one hand: Can Oracle build enough infrastructure and fund the expansion needed to meet OpenAI’s enormous computing demands?

On the other: Can OpenAI — still commercializing its products and not yet profitable — sustain such colossal payments?

Moody’s Warns: A High-Stakes Bet

Moody’s said these contracts highlight Oracle’s significant potential in AI infrastructure, but also amplify previously flagged risks. In July, Moody’s downgraded Oracle’s credit outlook from Stable to Negative.

Moody’s emphasized that Oracle faces a critical counterparty risk: relying on large commitments from a small number of AI companies to underpin its business model. This is a key consideration in any project financing, especially when revenue depends heavily on a single client.

The agency noted that Oracle’s data center expansion is effectively one of the largest project financings in the world. This spending trajectory is expected to cause debt growth to outpace EBITDA growth, leaving Oracle’s free cash flow negative for an extended period before reaching breakeven.

Even though Oracle is one of the world’s largest software companies, its annual operating cash flow is less than a quarter of that generated by tech giants like Google, Microsoft, or Amazon.

A “High-Risk Gamble”

Benjamin Lee, a professor at the University of Pennsylvania, said the Oracle-OpenAI deal is a “risky gamble” for both companies, involving massive overinvestment in data center capacity.

AI expert Gary Marcus labeled the transaction “Peak Bubble.”

Technology writer Ed Zirton offered a sharper critique, calling it a “grotesque attempt” by Oracle and OpenAI to deceive investors and the entire market. He argued the contract is unexecutable, and OpenAI will almost certainly run out of cash within a few years.

Analysts note that OpenAI’s problem lies in the math: projected annual revenue of around $10 billion, yet required to pay Oracle $60 billion per year over five years. Its ability to pay hinges on AI revenue growing much faster than currently expected — a highly speculative bet.

According to TradingKey’s stock analysis tool, the Wall Street consensus target price for Oracle is $330.38, implying 9.61% upside from current levels. Positively, no analyst has issued a “Sell” rating on the stock.