Oracle's Stock Crash Has Cost Larry Ellison $213 Billion in 10 Months. Should Investors Buy the Dip?

Ten months ago, Oracle (NYSE: ORCL) looked unstoppable. The company had become one of Wall Street's biggest AI winners as investors bet its cloud infrastructure business would play a central role in powering AI workloads. The stock surged to record highs, briefly pushing co-founder Larry Ellison's net worth above $400 billion.

Today, the story looks very different. Oracle shares have fallen by more than 50% from their peak, wiping roughly $213 billion from Ellison's personal fortune as the market has begun to question the company's aggressive AI data center spending.

The stock is now sitting at levels it hasn't seen since April 2025. So is this a good buying opportunity?

Why Oracle fell

Demand for Oracle Cloud Infrastructure remains strong. The company continues to sign large infrastructure contracts and expand its data center capacity. In fact, its remaining performance obligations reached a record $638 billion as of May 31, the end of its fiscal 2026.

The problem is that building AI data centers isn't cheap. Oracle dramatically increased capital spending to expand its cloud infrastructure. Capital expenditures topped $21 billion in fiscal 2026, up from about $7 billion a year earlier, and management says it expects to spend more than $25 billion in fiscal 2027. That begs the question: Will those investments generate attractive returns quickly enough to justify these mounting costs?

Those concerns intensified after S&P Global Ratings downgraded Oracle's credit rating to BBB-, just one notch above junk status. That's not a trivial development, because a lower credit rating translates into higher borrowing costs, which will make its already capital-intensive expansion strategy even more expensive. Investors are right to have concerns.

The long-term case remains intact

Despite the sell-off, Oracle's underlying business hasn't suddenly broken. The cloud infrastructure unit remains one of the fastest-growing parts of the company, and demand for AI computing capacity continues to outstrip supply across much of the industry.

Image source: Getty Images.

Oracle has also carved out a unique competitive position. Rather than competing directly against Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, Oracle increasingly partners with them.

That strategy broadens the company's addressable market while reinforcing its dominance in enterprise databases. Oracle's large backlog of signed cloud contracts also provides it with significant revenue visibility over the coming years.

Is it a buy?

If you're looking for a stock that will rebound and surge over the next quarter, Oracle may not be your best choice. Investor sentiment regarding the company has clearly deteriorated, and concerns surrounding its AI infrastructure spending aren't likely to disappear overnight.

If you have a long time horizon as an investor, however, this is not a stock to ignore. Oracle is making enormous investments because management believes AI infrastructure demand will continue growing for years. If that thesis proves correct, today's elevated spending could eventually translate into significantly higher cloud revenue and cash flow.

Of course, there's still risk. If enterprise AI adoption slows, Oracle could find itself in possession of billions of dollars of expensive infrastructure that takes longer than expected to generate attractive returns.

That's why I wouldn't call Oracle a screaming bargain. But I also wouldn't dismiss it because of a difficult 10-month stretch. The market has gone from pricing Oracle as though nothing could go wrong to assuming almost everything will. Reality will likely fall somewhere in between.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Oracle, and S&P Global. The Motley Fool has a disclosure policy.