Oracle Stock Drops Nearly 14% – Is Now the Time to Buy?
After a horrendous start to the last week of January 2025, technology stocks across the United States stock market saw a massive sell-off. The reason behind this behavior is the bold claim made by Chinese technology company DeepSeek, which allegedly was built quicker and more powerful than its American competitor ChatGPT. This is why there was some turmoil in the markets.
Capital expenditure budgets were much higher than what DeepSeek claims, meaning that demand for chips and semiconductors might be overstated today. This is why shares of NVIDIA Co. (NASDAQ: NVDA) led the way lower in the market, declining by over 17% in a single day. However, other stocks related to artificial intelligence also went down by association.
Investors can take shares of Oracle Co. (NYSE: ORCL), for example, which sold off by up to 14% during the same day as NVIDIA’s crash. However, there should be no association between this lower semiconductor demand and Oracle’s cloud and infrastructure business; if anything, it should boost it. Why? If DeepSeek proves anything, there will be a more energy-efficient and faster way to do things, and that’s where software dominates hardware.
Price Action Left Clues Behind
Before the sell-off, shares of Oracle rallied, following an announcement of an investment of up to $500 billion in developing artificial intelligence technology and infrastructure. Compared to other stocks, Oracle led the way.
Now, taking that behavior for what it means, investors can feel more comfortable in a potential thesis where Oracle recovers quickly since it deals with the infrastructure and cloud computing businesses that can make artificial intelligence more cost-effective in the first place.
Unlike NVIDIA’s business, where the faster chips get, the less need for chips there could be until a new revolutionary model is developed. Oracle’s upside seems to be an undeniable bargain now that the stock sits at only 82% of its 52-week high. For these reasons and its discount, some Wall Street analysts might want to keep their recent upgrades.
The Market’s Take on Oracle Stock
As of late January 2025, analysts from Cantor Fitzgerald decided to initiate coverage on Oracle stock, kicking things off with an Overweight rating and a valuation of up to $214 a share. This view, which is unlikely to change soon, would call for a net upside of as much as 35.3% from where Oracle stock trades today.
Despite its discount on a price action basis, Oracle stock still commands a premium from the broader markets, as investors can see from its current price-to-book (P/B) ratio of 30.7x. Compared to the rest of the computer sector, valued at an average of 8.3x P/B, Oracle clearly trades at a significant premium to peers.
Some value investors would call this expensive and filled with downsides. However, seasoned traders would confirm that the market is always willing to pay a premium for the names it expects to outperform its respective industry and the market.
With this in mind, it shouldn’t surprise investors to see an overall downtrend in Oracle stock’s short interest over the past quarter. This means that, as the bullish evidence and catalysts built up for this company over the past few months, short sellers decided that the chances of a new rally outweighed the ones for a sell-off.
So, they decided to close down some of their short positions, as investors can see through the 4.0% decline in short interest for Oracle over the past month alone. After these bearish traders left, some institutional buyers gladly came to take their place recently.
As of late January 2025, institutional buyers from Jennison Associates decided to boost their holdings in Oracle stock by 280%, an allocation that netted their entire stake at a high of $201.8 million today. Those from Abrdn followed closely with an 8.1% boost of their own, leaving them with $166.4 million worth of Oracle stock today.
What investors should take away from this DeepSeek sell-off is this: Making models and artificial intelligence more efficient doesn’t reduce its demand; it actually increases it due to the added benefits. This is when industries shift to catch up to the new norms, and Oracle seems to be front and center, ready to take on that shift today.
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