2 Reasons Oracle Stock Could Double in Value by 2028

Oracle’s shares are down ~60% from the OpenAI-deal spike, but the article argues the valuation gap has improved: P/E fell from ~76 post-announcement to 22 on a 37% net-income increase in fiscal 2026, with forward P/E projected around 16 vs a ~32 S&P 500 average. Performance obligations (RPO/backlog) rose from ~$455B to ~$638B over the nine months after the OpenAI announcement, alongside nearly $200B in additional AI-related deals, while debt is cited as a risk (borrowing ~ $130B) and capex totaled ~$56B in fiscal 2026. Net: despite leverage concerns, the piece frames Oracle as a potential buy if investors can tolerate the balance-sheet risk.

Analysis

The market is still treating this like a simple valuation reset, but the more important issue is capital efficiency. When an AI-infrastructure story is financed with meaningful debt, the equity is no longer a clean software comp multiple; it becomes a levered claim on utilization, pricing, and execution. That means the upside from backlog growth is real, but the path to equity rerating is gated by cash conversion and whether returns on the buildout clear the company’s funding cost.

The second-order winner from continued spend is the AI supply chain, especially GPU and networking vendors that get paid regardless of whether the end customer’s balance sheet works out. That makes NVDA the cleaner expression if you want exposure to persistent AI capex without taking Oracle’s leverage and customer-concentration risk. By contrast, hyperscalers and lower-quality cloud infrastructure names can pressure pricing if they decide to defend share, which would cap Oracle’s long-run margin leverage even if the top line stays strong.

The consensus is likely over-anchoring on backlog as though it were revenue. For a project-finance-like model, the key variable is not contract size but cancellation risk, payment timing, and whether incremental capacity earns above WACC over 6-18 months. If debt markets start demanding a wider spread or management lifts capex faster than backlog converts, the equity case weakens quickly; the stock can work on sentiment for a quarter or two, but leverage makes it fragile over a full cycle.

Key Decisions for Investors

• Favor NVDA over ORCL as the higher-quality way to own the AI buildout: long NVDA / short ORCL as a relative-value pair if you believe AI capex persists but financing risk will be repriced; keep it modest because ORCL can squeeze on backlog headlines.
• If entering ORCL, use a capped-risk structure instead of common stock: buy 12-18 month call spreads on ORCL after any post-earnings pullback, not after a momentum spike; thesis breaks if credit spreads on Oracle debt widen materially or capex guidance re-accelerates faster than cash flow.
• Long ORCL bonds vs short ORCL equity is the cleaner capital-structure expression if the market continues to reward backlog but stays skeptical of equity dilution/leverage; this benefits from backlog visibility while reducing upside dependence on multiple expansion.
• Set a watch item on Oracle credit and cash conversion rather than price alone: if backlog growth slows for two consecutive quarters or net leverage fails to stabilize, treat the equity as a sell-on-strength candidate.
• Avoid chasing the stock solely on valuation screens; if you need enterprise AI exposure with less balance-sheet risk, prefer AI suppliers and infrastructure beneficiaries over levered platform owners.