My Advice? Don't Get Distracted by Oracle Stock's Latest Slump.

It's been a wild couple of months for Oracle's (NYSE: ORCL) stock investors.

Oracle stock surged 36% on Sept. 10 in response to a blockbuster cloud deal with OpenAI and a five-year roadmap that would pole-vault Oracle Cloud Infrastructure (OCI) into one of the top clouds by revenue.

But Oracle stock is now trading down around 25% from its 52-week high as investors grow critical of artificial intelligence (AI) spending. Oracle is not alone. Last week, Meta Platforms sold off because investors didn't like how its operating expenses were outpacing revenue growth.

Here's why the sell-off in Oracle is overblown and why long-term investors should take a closer look at buying the growth stock now.

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AI-first cloud computing

OCI complements Oracle's legacy database services business, unlocking a new revenue stream from enterprise clients.

Oracle's multicloud data centers are unique because they are new, fast, and tailor-made for handling high-performance computing. Oracle has plans to bring more than 70 of these data centers online in just a few years.

By embedding native versions of Oracle Autonomous Database and Exadata Database Service inside Amazon Web Services, Microsoft Azure, and Alphabet-owned Google Cloud, Oracle reduces latency and boosts performance. So in this vein, Oracle is both a competitor and a partner of the big three cloud providers.

OCI's pricing model is specially geared toward companies that already use its database services. OCI is known to be cheaper than the big three cloud providers, especially for demanding workloads that can get expensive on other clouds. Oracle is specifically building its cloud offering around enterprise-scale AI workloads, whereas the big three offer considerable general compute.

Challenges remain

Despite Oracle's long-term potential, the stock definitely has its fair share of risks. The most glaring is Oracle's balance sheet. Unlike many other hyperscalers that have more cash, cash equivalents, and marketable securities than debt, Oracle has been taking on debt to build out its data center infrastructure. Leverage can pay off if Oracle converts its backlog of orders into real revenue, but it can backfire if a key customer like OpenAI pulls back on spending.

Oracle is using competitive pricing to win new business and position OCI as a worthy rival to the big three cloud providers. But it's worth noting that Oracle's aggressive five-year roadmap is for OCI revenue targets. If that revenue is achieved by undercutting the competition at the expense of margins, Oracle's profitability could be strained, delaying debt paydown.

Oracle is a bold bet in AI infrastructure

Oracle remains one of the best high-risk, high-potential-reward plays in cloud computing. Its multicloud business model could make Oracle one of the top AI clouds over the long term, but it comes at a steep price and a weakened balance sheet.

Oracle's high-profile deals with OpenAI and Meta Platforms are votes of confidence that Oracle's purpose-built AI data centers are a preferred choice for high-performance computing.

At 37.8 times forward earnings, Oracle is far from cheap, but the stock could look like a far better deal if OCI can grow into a high-margin cash cow. That said, some investors may prefer to wait to see how Oracle progresses on its existing contracts and if it can continue winning new business before smashing the buy button on the "Ten Titans" growth stock.

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.