In the first half of 2026, will Oracle and other "OpenAI chains" stage a comeback? This is a prerequisite.
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Wall Street is currently in a state of extreme anxious division: on one hand, there is the brutal reality of Oracle's stock price plunging 41% since its mid-September peak; on the other, there are the bulls betting on a "stunning reversal" in the first half of 2026.
According to Wind Chasing Trading Desk, on January 4, UBS specifically pointed out in its latest research report that the market's panic comes from two core issues: first, an extreme distrust in OpenAI as a "money-burning black hole" and doubts about its ability to deliver; second, concerns over whether Oracle’s own balance sheet can sustain investment-grade ratings amid aggressive capital expenditure.
If investors believe that OpenAI can deliver GPT-6 or secure a new round of massive funding in the first half of 2026, then at just 34x PE based on CY27, Oracle may be a huge undervalued opportunity. Conversely, if OpenAI succumbs to the onslaught from Google Gemini, or if Oracle is forced to conduct equity financing that dilutes shareholders, then the decline is far from over.
While UBS has lowered its price target to $280, it still maintains a "Buy" rating—which is essentially a high-stakes bet on “belief.”
Three "Lifelines" for an OpenAI Narrative Reversal
Currently, the market’s pessimism toward OpenAI has peaked, mainly focusing on ChatGPT’s slowing growth and difficulties monetizing on the enterprise side. UBS believes that for Oracle (as its largest infrastructure service provider) to reverse its decline, at least one of the following three things must happen:
Capital Injection (the most direct): Media reports state that OpenAI is seeking $100 billion in funding at an $830 billion valuation, with even Amazon and SoftBank lining up to invest. If this money comes through, the so-called "counterparty risk" would instantly dissipate.The Arrival of GPT-6 (most critical): Current model improvements are seen by the market as "incremental." UBS believes only a genuinely major leap—launching GPT-6 in Q1 2026—can silence doubts about Google Gemini overtaking it.Enterprise Use-Case Realization: Currently, 95% of enterprise AI projects are still in the "pilot" stage. 2026 must be the year enterprise AI (especially AI agents) truly land and generate income, proving that the billions spent on computing power were not wasted.
In short, as long as OpenAI can raise funds or launch a new model, Oracle can survive; otherwise, it’s a game of musical chairs.
Debt Black Hole: Oracle is "Walking a Tightrope"
What most worries investors is that Oracle, in order to support OpenAI’s compute needs, has essentially turned itself into “junk bonds.”
Leverage Surging: UBS predicts that counting lease liabilities, Oracle’s net debt to EBITDA ratio will reach a staggering 4.0x by 2027. For a company aiming to maintain its investment-grade rating (currently S&P BBB, outlook negative), this is dancing on the edge of a cliff.Not Just Buying Chips, But Building Facilities: Lease obligations have surged to $248 billion over the past two quarters. This isn’t just money spent on Nvidia GPUs—it also covers data center lease contracts up to 15 years. This means even if OpenAI can't pay, Oracle still has to keep paying rent.Funding Gap: UBS estimates that from FY26 to FY28, Oracle faces a funding gap of about $82 billion.
Oracle’s current strategy is “if not now, when?” But as soon as the rating agencies decide to downgrade, rising financing costs will directly eat into profits.
"Off-Balance Sheet Financing" and "BYOC": Financial Engineering or Temporary Fix?
Faced with immense financial pressure, Oracle has begun playing financial engineering games.
Bring-Your-Own-Chip (BYOC): Management revealed on an earnings call that they are considering letting customers (such as OpenAI) buy their own chips, while Oracle only operates the data centers. This would lighten the balance sheet, but also means lower profit margins and smaller revenue—viewed by the market as a form of "concession."Off-Balance Sheet Operations: Cooperating with private credit institutions for GPU sale and lease-back. UBS believes that if 50% of funding needs are covered this way, direct debt financing demand would be halved to around $40 billion.
Wall Street hates uncertainty. Oracle’s lack of clarity over its financing plans (not clearly addressed at Investor Day or on earnings calls) is one of the core reasons behind the stock’s plunge.
The Abilene Project: The Only Solid Positive
Amidst all the bad news, the super data center project in Abilene, Texas is the only bright spot.
Progress Exceeding Expectations: By the end of the November quarter, 96,000 GB200 GPUs were in place. This means the project has not been delayed as rumored but is ramping up quickly.Revenue Engine Kicking In: UBS estimates that as the Abilene project reaches 350,000 GPUs in scale in Q1 of FY26 (August), annualized revenue contribution will approach $8.3 billion. This is a key pillar for Oracle Cloud Infrastructure (OCI) revenue growth to accelerate beyond 80%.
This is Oracle's strongest card. If this project can be delivered on time and OpenAI pays as scheduled, the short thesis will collapse.
Valuation Logic: Disaster Already Priced In
Finally, let's see if this is a bargain.
Margin of Safety Under Pessimistic Assumptions: UBS did a stress test: Even if OpenAI contributes zero revenue by FY30 (disaster scenario), Oracle’s current stock price corresponds to just 12.4x P/E for FY30.Discount Relative to Microsoft: In contrast, Microsoft, which faces similar OpenAI risks, is trading at 18x FY30 P/E.
Oracle’s current share price (around $195) has already priced in a lot of pessimism—including OpenAI collapse, financing difficulties, and margin slippage. As long as any of the above risks are alleviated (such as OpenAI raising funds), even the slightest positive could trigger a violent valuation rebound. This is a classic high-risk, high-reward moment.
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