Oracle (ORCL.US) shares extended their rebound on Monday, fueled by increased capital expenditures from major U.S. technology companies, helping to ease market concerns about threats posed by artificial intelligence development. The stock of this bellwether software firm surged as much as 12% during the session, marking its largest intraday gain since September 10, before paring gains to close up 9%. Despite Amazon.com's (AMZN.US) commitment to invest $200 billion this year in data centers, chips, and other equipment, Oracle's share price remains approximately 50% below its September peak even after Monday's recovery.

"The software industry is not dead," wrote D.A. Davidson analyst Gil Luria in a report, upgrading the stock from "neutral" to "buy." "We believe enterprises will continue paying for Oracle's products, which won't be replaced by 'ambient programming'." Oracle's stock still trades about 50% below its all-time high.

Recent weeks have seen heavy losses across the software sector amid worries that AI will diminish demand for software products, causing the iShares Expanded Tech-Software Sector ETF to fall approximately 28% from its high. While these concerns are unlikely to disappear completely, some investors are betting that at least part of the approximately $650 billion collective AI tool spending by Amazon.com, Alphabet, Meta Platforms, Inc., and Microsoft will flow to software companies.

Regarding Oracle specifically, D.A. Davidson expressed increased optimism about the company's relationship with OpenAI, developer of ChatGPT. This comes as OpenAI faces questions about its lack of profitability and need for rapid growth to meet substantial spending commitments. "Based on strategy adjustments, new frontier model launches, pressure on competitors from Google's recent rise, and progress in financing efforts, we now hold a more positive view of OpenAI," Luria wrote.

Luria stated that "the restructured OpenAI will reemerge as a top challenger to Google and, with newly acquired funding, will be able to meet its obligations this year, including those to Oracle." The analyst noted that OpenAI has begun focusing on its core frontier models and ChatGPT while reducing investment in peripheral projects. "The company appears to have realized it needs to align with NVIDIA, Microsoft, and Amazon.com rather than attempting to compete with them," the analyst added.

Luria and his team indicated they expect valuations of related publicly traded companies could see significant increases as investors again view OpenAI as a winner. However, not all Wall Street analysts share this perspective. Melius Research analyst Ben Reitzes noted on Monday that Oracle "doesn't generate cash flow and there's no guarantee OpenAI will necessarily beat Anthropic and Google."

This hasn't prevented Oracle from planning to raise $45 to $50 billion this year to build additional capacity to meet contract demands from major cloud customers including AMD, Meta Platforms, Inc., and NVIDIA. Reitzes stated that while he admires Oracle's "decision to swing for the fences at this moment, this could be a difficult journey as debt and equity pressures will create headwinds for some time."