Just five months ago, Oracle (ORCL 2.46%) had a historic surge that pushed its market capitalization close to $1 trillion and briefly made Larry Ellison, the co-founder, chair, and CTO of Oracle, the wealthiest person in the world.
In response to big gains and long-term growth potential from Broadcom, Netflix, and Oracle, I coined the term "Ten Titans" last August as a way to broaden the "Magnificent Seven" beyond Nvidia, Alphabet, Apple, Microsoft, Amazon, Meta Platforms, and Tesla.
But my prediction that Oracle would remain a red-hot stock in 2026 has missed the mark, as Oracle stock trades down 52% from its all-time high and 19.5% year to date at the time of this writing.
Here's why Oracle is selling off, why the investment thesis is being challenged, and if Oracle is worth buying on the dip.
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Oracle is caught up in the software industry slump
Oracle is investing heavily in Oracle Cloud Infrastructure (OCI) by building out data centers to support artificial intelligence (AI)-driven demand. Cloud made up 50% of revenue in its latest quarter. But Oracle's database and data management software segment is still the high-margin cash cow that anchors the company.
The software industry is getting hammered by fears that AI will challenge established workflows. Oracle isn't alone. Microsoft is the worst-performing Magnificent Seven stock in 2026. Former Wall Street darling ServiceNow has lost a third of its value already this year.
There are reasons to believe the sell-off has gone too far, but in the meantime, Oracle could continue getting dragged down in lockstep with the broader industry.
NYSE: ORCL
Key Data Points
Oracle's OpenAI problem
Oracle popped to an all-time high after reporting its first-quarter fiscal 2026 earnings in September, largely because it announced a bold plan to grow OCI revenue from around $10 billion in fiscal 2025 to $144 billion in fiscal 2030. The forecast wasn't conjured out of thin air, as Oracle noted a 359% increase in remaining performance obligations (RPO) -- which is basically a contract backlog. Then in December, Oracle grew its RPO to $523 billion. Oracle has landed high-profile deals with hyperscalers like Meta Platforms. But it is largely dependent on OpenAI -- which makes up around $300 billion of its RPO.
Investors are losing confidence that OpenAI will be able to fund its capital-intensive spending plans. Similarly, Microsoft sold off after its most recent earnings release when it unveiled that 45% of its $625 billion in RPO is tied to OpenAI.
Anthropic's Claude model directly challenges OpenAI's dominance, so investors aren't taking Oracle's RPO for granted like they were a few months ago.
Buying the dip on Oracle
Oracle is selling off amid a broader downturn in software stocks and as investors lose confidence in OpenAI-related contracts. Unlike many hyperscalers, Oracle is no longer free cash flow positive and is relying on debt to fund its expansion.
Oracle now trades at 26.8 times earnings and 19.4 times forward earnings. It's a dirt-cheap price at first glance. But buying Oracle requires the conviction that its core software business will remain a cash cow, that OpenAI will make good on its orders, or that Oracle will be able to redirect data center capacity to an alternative customer if OpenAI's orders are smaller than originally anticipated.
Given all of these uncertainties, it's best to only approach the stock if you have a high risk tolerance and believe in Oracle's vision.
