Oracle (NYSE:ORCL) stock continues to spur investor optimism, buoyed by its artificial intelligence deals.

However, on Wednesday, Oracle faced scrutiny as Moody’s Ratings highlighted potential risks in its recently signed $300 billion artificial intelligence contracts.

The rating agency commented that this development is significant as it raises concerns about Oracle’s reliance on large commitments from a small number of AI companies, which could impact its business model.

Also Read: Oracle Soars To Record Highs With Massive Cloud Contracts Tied To OpenAI

Moody’s Ratings highlighted risks tied to Oracle’s $300 billion AI contracts, including its massive deal with OpenAI. However, it chose not to change the company’s credit rating.

It compared its data center expansion to one of the largest project financings. Moody’s also warned against Oracle’s debt rising faster than EBITDA, amounting to negative free cash flow for years before breaking even.

Reuters reports that Moody’s analysts noted the “tremendous potential” for Oracle’s AI infrastructure business but flagged counterparty risk as a critical issue.

OpenAI Risk

Meanwhile, OpenAI, a key player in the AI industry, is grappling with financial challenges as it struggles to meet its obligations under the $300 billion deal with Oracle.

Reports indicate that OpenAI lacks the funds to honor the agreement, raising questions about its future and the impact on Oracle.

Despite these issues, some experts believe OpenAI’s deal with Oracle underscores its early leadership in the AI sector, suggesting potential investor interest in private markets.

Short-seller Jim Chanos has expressed skepticism, questioning the quality and timing of Oracle’s backlog and comparing it to past accounting controversies.

ORCL Price Action

Oracle stock has gained 81% year-to-date, topping the S&P 500 Information Technology Sector Index’s 17% returns. During premarket trading on Thursday, Oracle shares were up 1.36% at $305.51.

The stock is trading within its 52-week range of $118.86 to $345.72, according to Benzinga Pro data. Oracle’s impressive 81.54% year-to-date return reflects strong momentum in the software sector, bolstered by rising demand for cloud solutions.

With a P/E ratio of 69.77, the stock is trading at a premium, indicating high investor expectations for future growth, especially as it approaches the upper end of its 52-week range.

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