Oracle Jump Amid Expanding Cloud and AI Business

Oracle Corporation, once seen as a laggard in the cloud industry, is making a powerful resurgence in the artificial intelligence (AI) market. With partnerships that include tech giants such as Nvidia and Amazon Web Services (AWS), Oracle is leveraging its newfound AI momentum to accelerate its growth in the cloud computing space. The company’s shares have surged, boosted by an earnings report that surpassed Wall Street’s expectations. This revival story is a testament to Oracle’s strategic pivot into AI and cloud services, areas that are increasingly defining the future of technology.

Surprising Earnings and AI Growth Power Stock Surge

Oracle’s most recent earnings report exceeded all projections, triggering a 9% spike in the company’s stock in premarket trading. The stock is now up roughly 33% for the year, significantly outpacing competitors such as Microsoft, Google, and Amazon. The earnings for the fiscal first quarter of 2024 showed a 6.9% rise in revenue to $13.31 billion, alongside a 10% leap in profits, which stood at $2.93 billion.

CEO Safra Catz underscored how Oracle’s shift to cloud services has transformed the company’s bottom line. “As cloud services became Oracle’s largest business, both our operating income and earnings per share growth accelerated,” said Catz, emphasizing that cloud infrastructure is now at the heart of Oracle’s business model.

Oracle’s AI strategy is playing an integral role in this shift. The company reported new contracts worth $3 billion for 42 additional Nvidia graphics processing units (GPUs), a clear indicator of its growing influence in AI. As AI becomes a major driver of enterprise transformation, Oracle’s cloud infrastructure is quickly emerging as a go-to solution for businesses looking to leverage this technology. Nvidia’s GPUs, essential for training AI models, have been a linchpin in Oracle’s cloud growth. “Nvidia’s GPUs are critical for the AI training workloads, and our partnership has created incredible demand for Oracle’s cloud infrastructure,” Catz added.

AI and Cloud Computing: Oracle’s Late-Mover Advantage

For years, Oracle’s competitors dominated the cloud computing space, leaving Oracle in the shadows. Oracle’s late entry into the cloud sector may have been a blessing in disguise. The company’s more modern cloud infrastructure is specifically designed to support AI workloads, a key differentiator as demand for AI processing power grows. According to Larry Ellison, Oracle’s co-founder and Chief Technology Officer, “Building giant data centers is something that Oracle has proven to be very good at. It’s the reason we’re doing so well in the AI training business.”

Ellison highlighted that Oracle’s approach is unique in that it does not compete directly with clients in the AI market, a neutral stance that has helped the company secure partnerships with some of the biggest names in tech. Microsoft, Google, and Amazon all allow Oracle’s databases to run on their clouds, and Oracle even provides the infrastructure for Microsoft’s Bing AI chatbot. The neutral positioning has attracted clients who want to avoid being upsold on proprietary cloud services. “They’re not testing out experimental things. They’re just building something that really works,” said Nick Frosst, co-founder of AI startup Cohere, which uses Oracle’s cloud services.

One of the most noteworthy partnerships Oracle has secured is with Nvidia. Nvidia selected Oracle to host its own cloud offering, which includes Nvidia’s advanced GPUs. These GPUs are critical for AI model training, a process that consumes vast amounts of computational power and resources. “Nvidia’s GPUs have been a scarce and highly sought commodity in the tech industry,” Ellison said, noting that Oracle’s data centers are well-equipped to handle the growing demand for AI training.

Strategic Alliances: Amazon, Nvidia, and Beyond

Oracle’s partnerships with Amazon and Nvidia are central to its current success. The company recently announced a strategic partnership with Amazon Web Services, which will allow customers to access Oracle’s Autonomous Database and Exadata Database Service on AWS infrastructure. The deal gives Oracle a foothold in one of the world’s largest cloud ecosystems. Larry Ellison spoke enthusiastically about the deal, stating, “We are seeing huge demand from customers that want to use multiple clouds. Amazon and Oracle are seamlessly connecting AWS services with the very latest Oracle Database technology.”

AWS CEO Matt Garman echoed Ellison’s sentiment, noting, “This new, deeper partnership will provide Oracle Database services within AWS to allow customers to take advantage of the flexibility, reliability, and scalability of the world’s most widely adopted cloud.”

These partnerships reflect Oracle’s strategic pivot toward offering a hybrid cloud environment, which allows companies to run Oracle databases on their preferred cloud platforms. In addition to AWS, Oracle has inked similar deals with Microsoft and Google, making Oracle’s cloud a popular choice for enterprise customers looking to leverage AI and machine learning tools across multiple platforms.

AI as a Long-Term Growth Driver

Oracle’s transformation is largely driven by the explosive growth in artificial intelligence, and the company is capitalizing on this trend. A recent Morgan Stanley report estimated that AI will grow to represent more than half of Oracle’s total cloud revenue by 2027, a significant leap from its current 15%. Larry Ellison remains confident that AI demand will continue to grow, stating, “There’s no slowdown or shift coming. This business is just growing larger and larger and larger.”

One reason for this optimism is the sheer scale of investment needed to build advanced AI models. Ellison remarked, “The entry price for a real frontier model is about $100 billion over the next 4 to 5 years. That’s a lot of money, and it doesn’t get easier.” Given the high cost and complexity of developing AI, Oracle’s modern data centers are well-positioned to capture market share as businesses increasingly turn to AI to drive growth.

However, some analysts have raised concerns about the sustainability of this growth. Brad Reback, an analyst at Stifel, warned that the demand for AI training could be transitory, particularly as competitors build more AI-specific data centers. “I do wonder whether Oracle can sustain what I view as a transitory architecture lead,” Reback said, questioning whether Oracle’s current momentum can be maintained over the long term.

Tech Investors Love the New Oracle

Oracle’s recent moves in the AI and cloud markets have garnered significant attention from tech investors, who are increasingly bullish on the company’s prospects. The buzz around Oracle’s AI initiatives and partnerships with Nvidia and Amazon is clear from investor sentiment on social media, where influential voices are weighing in on the company’s strategy and future.

Ben Pouladian, a noted tech analyst, emphasized Oracle’s methodical approach to scaling AI infrastructure, comparing it to Elon Musk’s Starlink satellites in terms of consistency. “Oracle has more demand than supply, scaling through the same AI automation they sell. The key? Repeating the exact same process—just like Elon Musk’s Starlink satellites or In-N-Out burgers, every data center is identical no matter the location,” he tweeted. This highlights Oracle’s disciplined strategy in building AI-ready data centers, which has been crucial to meeting the surge in demand for AI-powered cloud services.

Another tech influencer, Amy Marlow, praised Oracle’s focus on AI, tweeting, “Oracle’s strong earnings and new cloud services show they’re ready to compete in the AI market.” This sentiment is shared by investors who are excited about Oracle’s ability to pivot successfully toward AI and cloud, further evidenced by the 33% year-to-date increase in the company’s stock.

Larry Ellison’s vision for AI at Oracle is also resonating with the investment community. Ellison made a bold statement during the company’s earnings call, noting, “The entry price for a real frontier AI model is about $100 billion. That’s a lot of money, and it doesn’t get easier.” His remarks underline the capital intensity and exclusivity of the AI market, which has positioned Oracle as a critical player. Investors see this as a competitive advantage, particularly in light of the company’s strong partnerships and growing demand for AI infrastructure.

For those who have followed Oracle’s journey, it’s clear that the company is shedding its legacy image and emerging as a key enabler of AI technologies. As one investor tweeted, “Until people understand AI is not an application, but a way of computing that will live in all technology, they won’t understand the magnitude of what is going on.”

The combination of strong financial results, strategic AI partnerships, and consistent execution in cloud services has driven a wave of positive sentiment among investors. Oracle, once perceived as a laggard in the tech space, is now a stock to watch in the eyes of the tech investment community.

Oracle’s AI Renaissance

Oracle’s transformation from a cloud laggard to an AI powerhouse is a testament to the company’s strategic focus and partnerships. By aligning itself with tech giants like Amazon and Nvidia, and by investing heavily in AI infrastructure, Oracle has positioned itself as a key player in the AI revolution. Its financial performance reflects this resurgence, with strong earnings growth and a stock price that continues to climb.

As AI reshapes industries and economies, Oracle’s ability to sustain this momentum will depend on its continued innovation and its ability to meet the growing demands of AI developers. For now, Oracle’s AI-powered resurgence is proving that even tech giants from a bygone era can rise again—if they have the right strategy in place.