Oracle Stock Is Down 44% in the Last 9 Months. Is This a Buying Opportunity, or Is More Downside Ahead?

The prevailing views on Oracle (NYSE: ORCL) stock remain relentlessly negative. After the stock's brief spike last September, investors turned on the company because its massive backlog is partially backed by a $300 billion deal with ChatGPT parent OpenAI, and many investors continue to question whether that company can meet the terms of its contract with Oracle.

Although its stock has begun to recover from the 52-week low, Oracle is still down 44% from its peak. Consequently, the question for investors is whether the pullback makes Oracle a buy or whether they should remain negative on the cloud stock.

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Where Oracle's AI stands

It has now been more than nine months since Oracle's report for the first quarter of fiscal 2026 (ended Aug. 31, 2025). At the time, its remaining performance obligation (backlog) in fiscal Q1 had risen from $138 billion to $455 billion, a 230% increase in a single quarter.

Most of that gain came from the aforementioned deal with OpenAI. Investors began to question whether OpenAI was in a position financially to live up to the terms of that deal, and all the stock gains driven by it reversed in subsequent weeks.

Admittedly, investors have to consider more than the potential revenue losses. In order to fund its artificial intelligence (AI) build-out, Oracle has taken on almost $130 billion in debt, a staggering sum considering its $43 billion in stockholders' equity. Oracle needed that cash to fund its nearly $56 billion in capital expenditures during fiscal 2026 to help fund its AI expansion.

Amid that debt, Oracle could face considerable pain if its borrowing does not lead to more business. That risk has probably played a role in Oracle's stock price decline.

Still, its backlog has now risen to $638 billion. That growth amounts to 62% of the size of the OpenAI deal in just the past nine months. That points to continued strong backlog growth, so much so that Oracle will likely maintain a solid AI infrastructure business even if the worst fears about OpenAI materialize.

Moreover, Oracle's P/E ratio is at 32, far below its peak of 76 last September and slightly under the 34 average over the last five years. Considering the growth in AI, one could argue that Oracle stock trades at a reasonable valuation.

Is Oracle a buying opportunity, or is more downside ahead?

Although Oracle stock could continue moving lower, Oracle is likely a buying opportunity -- if you can handle the risk. Indeed, its nearly $130 billion in debt could place Oracle in dire financial straits if the anticipated demand for AI infrastructure does not materialize.

However, the massive growth of Oracle's backlog (even without OpenAI) indicates that companies need more of its AI infrastructure. It could pay in the long term to start acquiring shares at current levels.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.