Morgan Stanley warns Oracle has “little room for error” as it builds out its GPU-as-a-service business. The bank cut its price target to $213 from $320, citing rising capital needs and a tougher profit outlook. Analyst Keith Weiss says the expansion will likely push EPS below targets and drive materially higher funding needs.

The scale of Oracle's buildout presents a major growth opportunity but also significant financial strain. Morgan Stanley's model projects $275 billion in cumulative cash capex from FY26 to FY28, well above consensus. This spending is expected to push gross adjusted debt above $400 billion and leverage over 5x by FY28.

From an equity perspective, the bank sees a “balanced risk/reward,” believing the challenges are already reflected in the share price. However, credit risks remain underappreciated. Morgan Stanley recommends buying credit default swaps and selling benchmark bonds, arguing funding pressures and leverage aren't fully priced into spreads despite recent underperformance.