Oracle (ORCL 2.00%) stock fell as much as 16.5% on Dec. 11 in response to the company's second-quarter fiscal 2026 results.
Now, at the time of this writing, Oracle is down roughly 42% from its 52-week high, which was made just three months ago.
Here's why the sell-off in Oracle has gone too far, and why Oracle stands out as a top artificial intelligence (AI) growth stock to buy and hold.
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Oracle is swinging for the fences
Leverage is a double-edged sword. It magnifies gains to the upside and amplifies losses. Debt allows companies to fund ideas that wouldn't be possible with their own earnings. Oracle is doing just that.
Oracle exited its latest quarter with over $80 billion in non-current notes payable and other borrowings net of cash and cash equivalents. This is basically long-term debt net of cash.
By comparison, other cloud giants and chip makers, like Amazon, Microsoft, Alphabet, Nvidia, and Broadcom, either have very little debt or more cash, cash equivalents, and marketable securities than debt on their balance sheets.
In the wild west of AI, Amazon, Microsoft, and Alphabet are proven major players using free cash flow (FCF) from their existing oil wells to explore for new reserves. Whereas Oracle is taking a chance and hoping to strike it big with a few wildcat wells. At least that's the narrative that is floating around right now. But there's more nuance to it.
NYSE: ORCL
Key Data Points
Oracle's game plan isn't as far-fetched as it seems
While Oracle is taking on a lot of debt to fund the buildout of its AI data centers and paying over $1 billion in interest on its debt every quarter, its core software business is a cash cow. And the only reason Oracle is FCF negative is that it is spending so much on capital expenditures.
Oracle is just over halfway through a multiyear buildout of 72 multicloud data centers that embed native versions of Oracle Exadata Database Service and Oracle Autonomous Database inside Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
This method eliminates the need to transfer large datasets across clouds, thereby reducing latency, enhancing performance, and lowering costs. As these data centers get built, along with data centers specific to Oracle Cloud Infrastructure, Oracle should see its FCF increase and its capex fall, which should allow it to accelerate its debt paydown.
Oracle is worth the risks
Oracle's bold bet on infrastructure makes a ton of sense for investors who believe that demand for cloud infrastructure, especially for high-performance computing (which is Oracle's focus), will increase in the coming decades. And if it pays off, Oracle will look incredibly cheap. Even now, it trades at under 30 times forward earnings, which is a steal for a high-octane growth stock that should be able to accelerate earnings growth in the near future.
Investors should only approach Oracle if they have a high risk tolerance, a long time horizon, and are willing to tolerate significant volatility. Some folks may prefer to wait and see how profitable Oracle's contracts are before buying the stock, as Oracle could be undercutting competitors on pricing to win contracts, which would lead to lower margins.
Even when factoring in the risks, Oracle's potential is sky high, making it one of the best AI growth stocks for long-term investors to buy in 2026.
