Oracle and Nvidia Shares Have Plunged Over the Past 3 Months. Is It Time to Cut These Tech Stocks Loose?
Oracle and Nvidia shares have dropped significantly over the past three months due to investor skepticism regarding AI infrastructure spending. Despite concerns about high capital expenditures and circular deals, analysts argue against selling. Nvidia retains an 86% GPU market share with strong earnings growth and new CPU opportunities. Oracle holds $638 billion in remaining performance obligations, suggesting its current spending supports future revenue realization. Both companies remain well-positioned for long-term AI growth despite short-term volatility.
Many artificial intelligence stocks have suffered the wrath of unhappy investors over the past several months, and Oracle (ORCL +1.81%) and Nvidia (NVDA +2.93%) are no exception.
Investors have become increasingly skeptical that all the spending on AI infrastructure will pay off, and that's put pressure on companies' share prices, with Oracle tumbling 28% and Nvidia sliding 9% over the past three months.
With their share prices declining and AI spending pessimism on the rise, is it time for investors to ditch Oracle and Nvidia? Not so fast.
Image source: Getty Images.
The case for holding onto Nvidia stock
Some shareholders have grown skeptical of Nvidia's AI dealings lately. For example, Nvidia is in talks with OpenAI to provide the ChatGPT maker with $250 billion in funding to help it build data centers. Separate talks are happening about how Nvidia will supply the GPUs for those data centers.
This type of circular deal has some shareholders questioning whether Nvidia will be able to grow its sales organically or will have to rely on lending out money to other companies to build AI infrastructure that spurs sales of its GPUs.
What's more, Nvidia recently announced a $500 billion infrastructure deal with SK Group, the parent organization of the memory processor company SK Hynix. Investors pushed down Nvidia shares on that news, too, as they worried that the company is committing too much money to other tech companies.
But some of their concerns may be a bit overdone. Consider that tech companies will invest $750 billion in AI infrastructure projects this year, most of which don't involve any Nvidia investments. That spending is fueling sales of Nvidia's GPUs, which currently have 86% of the GPU data center market.
NASDAQ: NVDA
Key Data Points
That dominance could fuel Nvidia's sales and earnings for years. Revenue rose by 85% in the first quarter of fiscal 2027 to $81.6 billion, and diluted earnings jumped 140% to $1.87 per share.
And more AI opportunities may be around the corner. Nvidia recently debuted its next-generation Vera CPU for AI, which will directly compete with Intel and Advanced Micro Devices CPUs. AI agents are increasingly relying on CPUs to power their responses, and Nvidia sees this as a potentially new growth area. Nvidia said in a press release that its Vera CPU processor offers 50% better performance for AI agents than the x86 CPU architecture used by Intel and AMD.
For current shareholders, all of the above are good reasons to hold onto Nvidia stock. The AI boom is still well underway, and Nvidia's GPU technology is a clear winner. And if it gets even a sliver of the CPU market, the company could open up an entirely new revenue stream.
Why you shouldn't cut Oracle loose just yet
Investors have punished Oracle stock lately because they're unhappy with how much the company is spending on AI data centers. And, in some regard, they're not wrong to take notice.
Oracle's capital expenditures (capex) could rise to as much as $70 billion in fiscal 2027, according to management, with $40 billion of that spending funded by debt and equity financing, $20 billion of which was previously announced and came from a share sale.
What's got investors really upset is that Oracle's already raised $43 billion in debt in fiscal 2026, and the new spending will temporarily reduce Oracle's margins, management said.
NYSE: ORCL
Key Data Points
So, that's the not-so-great news. But there are some very good reasons why dumping Oracle shares right now might not be a wise move.
Most importantly, Oracle is swimming in lucrative contracts. The company had $638 billion in remaining performance obligations (RPO) -- binding contracts that represent a revenue backlog -- in fiscal 2026, a 363% increase from the previous year. About $77 billion in those RPOs will be realized as revenue in fiscal 2027, and an additional 34% will be realized over the next one to three years.
What's more, Oracle's temporarily declining margins aren't expected to be a long-term drag on the company's earnings. Management is guiding to non-GAAP earnings per share of $8.05 in fiscal 2027, representing an 18% increase over 2026.
Understandably, Oracle shareholders are seeing the spending increases, rising debt, and temporarily shrinking margins, and are panicking. But Oracle is investing in new infrastructure that will help it fulfill its sizable contracts. It's short-term pain for what likely will be long-term gain for the company and its shareholders.
