The past few months have been tough for artificial intelligence (AI) stocks. This is evident from the 4% decline in the Global X Artificial Intelligence & Technology ETF in the past three months.
Big AI names such as Nvidia, Palantir, and Broadcom have been under pressure over the past three months, with a couple of them seeing a sharp pullback in their stock prices. Oracle (ORCL 3.63%) has been in the same boat, with the stock shedding 51% of its value since reaching a 52-week high in September 2025.
There are several factors that have weighed on these key AI players in recent months. From concerns about debt-fueled funding to circular financing deals and expensive valuations, investors have found reasons to be wary about investing in AI stocks. Oracle's latest results, however, can lift the mood in the AI sector.
Let's look at the reasons why.
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Oracle proves that AI's terrific momentum is sustainable
There are two reasons behind Oracle's steep slide in recent months.
The first is the company's reliance on OpenAI for a significant chunk of its backlog. Specifically, $300 billion of Oracle's remaining performance obligations (RPO) in the first quarter of fiscal 2026 were attributable to OpenAI. Investors saw this as a red flag, worrying about how OpenAI would come up with the funds needed to pay off the massive contracts with Oracle.
NYSE: ORCL
Key Data Points
Second, Oracle has been rapidly increasing its capital expenditure to build more AI data center infrastructure. As a result, the company has been taking on more debt, creating another cause of concern for investors. After all, if Oracle builds so much infrastructure and a key client such as OpenAI doesn't pay up, its business will take a major hit.
However, Oracle's fiscal 2026 Q3 results (for the quarter ended Feb. 28) seem to have assuaged investors' concerns to some extent. The AI stock shot up impressively in extended trading, driven by a big revenue and earnings beat. The company's top line jumped by 22% year over year to $17.2 billion, while adjusted earnings were up by 21%.
What's more, Oracle's RPO, which is the total value of contracts yet to be fulfilled at the end of a period, shot up by 325% from the year-ago period to $553 billion. Oracle pointed out that "most of the increase in RPO in Q3 related to large-scale AI contracts where Oracle does not expect to have to raise any incremental funds to support these contracts."
The stronger-than-expected growth in Oracle's cloud segment further improved investor confidence. Specifically, the company's cloud infrastructure revenue jumped by 84% year over year to $4.9 billion, suggesting that it is converting its massive backlog into revenue. What's more, Oracle's earnings guidance for the current quarter is ahead of expectations, and the company has also increased its fiscal 2027 revenue guidance to $90 billion from the earlier estimate of $89 billion.
Oracle, and other AI stocks, could get a nice boost now
Oracle has been betting big on AI. It plans to spend $50 billion in capital expenditures this fiscal year, up from $21 billion last year. So, the company's ability to show that its bets are paying off in the form of robust top- and bottom-line growth should bode well not just for Oracle, but for the AI sector as a whole.
That's why it seems like a good time for investors to buy attractive AI stocks, including Oracle, that have been under pressure in recent months.
