Oracle's stock could be a big winner for the next decade, according to this analyst. Here's why.

By Christine Ji

Fears over Oracle's AI debt load and OpenAI concentration are overblown - and they mask a massive long-term opportunity, according to Guggenheim

Oracle's "bring-your-own-chip" model could lower the company's actual cash needs to under $100 billion, according to Guggenheim analyst John DiFucci.

Over the past few months, investors have been treating Oracle's stock with caution. Reflecting fears of ballooning capital expenditures and the risk Oracle could lose its investment-grade credit rating, shares have plunged 48% from their September high.

But for investors willing to look past the next few quarters, Guggenheim Securities analyst John DiFucci argues that Oracle (ORCL) is a rare "decade stock" that's just getting started and is on track to deliver big gains for investors over the next 10 years.

He believes Oracle is on its way to becoming the leading provider of artificial-intelligence infrastructure, with the company growing earnings at "hyper rates" and generating a "waterfall" of robust free cash flow.

In a Tuesday note naming Oracle his "best idea" for 2026, DiFucci reiterated his buy rating and $400 price target, more than double the stock's current price of $179.92. Shares lost about 6% in Tuesday's session.

DiFucci projects that Oracle's revenues will nearly quadruple over the next five years, rising to $228 billion in fiscal 2030 from an estimated $67 billion in 2026.

Read more: Oracle and Amazon are AI 'loser' stocks - but here's why that's primed to change

Hitting that revenue target will require Oracle to invest $292 billion in AI infrastructure, which has sparked concern that Oracle's debt could lose its investment-grade rating. However, DiFucci argues that the actual cash Oracle needs to spend could be $100 billion or less thanks to a "bring-your-own-chip" approach that the company introduced on the most recent earnings call. If customers provide their own graphics processing units to be outfitted into Oracle's cloud infrastructure, Oracle could save significantly, as DiFucci estimates that chips comprise between 45% and 65% of AI project costs.

Such a deal "would increase gross margins by 15 to 25 percentage points to about 50% to 60%," according to DiFucci. The resulting savings could add 50 to 80 cents per share of earnings.

"The BYOC option makes it more evident that customers are not simply renting GPU use in the case of Oracle," DiFucci wrote. "The technological advantages of [Oracle Cloud Infrastructure] add incremental value, or else anyone would be able to do this."

Also read: Microsoft, Oracle and ServiceNow could be the top stocks to play a software comeback

DiFucci also addressed concerns surrounding Oracle's relationship with OpenAI. OpenAI currently accounts for a staggering 60% of Oracle's remaining performance obligations, or roughly $315 billion in future business, Guggenheim estimates. Investors are questioning OpenAI's ability to fulfill hundreds of billions of dollars in financial commitments while reportedly burning cash and generating only about $20 billion in revenue last year.

While OpenAI-related revenue concentration is high, DiFucci argues it validates Oracle's technology and cements its status as a primary utility for the AI economy. He believes revenues from the OpenAI partnership will ramp aggressively, from an estimated $3.6 billion in fiscal 2026 to $62.4 billion by fiscal 2030.

DiFucci also sees several avenues for OpenAI to pay for its agreement with Oracle, whether through massive capital raises and a potential IPO, or by leaning on partners like SoftBank (JP:9984) to foot the bill for chips directly.

"We see this as an opportunity for investors with a longer timehorizon, a few years rather than a few weeks or months, to start to build a position," DiFucci wrote. "While we keep calling this a decade stock (because we think it is), we expect the numbers to be irrefutable in half that time and be obvious long before that."

Now read: Oracle is the canary in the coal mine for Big Tech's debt-fueled AI spending spree

-Christine Ji

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