Monness Maintains Neutral Stance on Oracle (ORCL) Stock

Oracle Corporation (NYSE:ORCL) is one of the Most Promising AI Stocks to Buy Right Now. On October 20, Monness analyst Brian White maintained a “Neutral” stance on the company’s stock, giving a “Hold” rating. The analyst’s rating is backed by a combination of factors around the company’s current financial trajectory and strategic initiatives. While Oracle Corporation (NYSE:ORCL) continues to make significant strides in the broader AI sector, with new innovations and partnerships, the analyst opines that the ambitious revenue targets of the company could require significant capital expenditures.

Furthermore, Oracle Corporation (NYSE:ORCL)’s updated financial targets, while optimistic, exhibit a high growth rate, which could be challenging to achieve considering the competitive landscape. Oracle Corporation (NYSE:ORCL)’s plans for cloud infrastructure and AI platforms are promising; however, the analyst believes that the execution of such plans amidst increased expectations and financial commitments warrants a cautious approach.

Headwaters Capital Management, an investment management company, released its Q3 2025 investor letter. Here is what the fund said:

“The catalyst for the September AI trade was Oracle Corporation’s (NYSE:ORCL) announcement of a 5-year contract with OpenAI for $300B (implying annual contract value of $60B) to host the company’s LLMs at Oracle data centers beginning in 2027. While the market has grown desensitized to these large headline numbers, it’s useful to step back and put these figures into context from the perspective of both the magnitude of spending and return on investment. It’s easiest to start with the amount of investment that five companies are collectively spending on AI. The table below outlines CAPEX spending by the five hyperscalers and compares it with the other 495 companies in the S&P 500. In 2026, these five hyperscaler companies are expected to spend $405B of CAPEX, nearly all of this related to AI infrastructure build.

In terms of the economics around this investment, details have emerged from the Oracle-OpenAI announcement that can help investors begin to untangle the economics of these contracts. It’s easiest to unpack this from the perspective of each of the players involved.

Committed to spending $60B annually with Oracle to host the Company’s LLMs. This annual expense represents the Company’s cost of goods sold for running LLMs. OpenAI is on track to generate $13B of revenue in 2025 (Source: Reuters and the Information). So just to cover the cost of operating their LLMs on this single contract, OpenAI needs revenue to grow 4.6x in 2 years, or a +115% CAGR over the next 2 years. This is a single contract for hosting services. OpenAI has numerous other hosting contracts, implying that the company needs revenue to significantly exceed $60B just to cover the company’s total cost of goods sold…” (Click here to read the full text)

READ NEXT: 13 Cheap AI Stocks to Buy According to Analysts and 11 Unstoppable Growth Stocks to Invest in Now

Disclosure: None. This article is originally published at Insider Monkey.