Oracle on the Rise: AI Drives the Cloud Business

Cloud computing has emerged as one of the first sectors to benefit significantly from artificial intelligence (AI). This is particularly evident in Oracle's recent quarterly results. Although Oracle is not the largest cloud provider, the company recorded significant growth in its cloud infrastructure business thanks to rising demand for AI. Oracle is striving for expansion and has increased its capacities while forming partnerships with other major technology companies to attract additional business. These efforts could further strengthen the company's position. Jordan Klein, technology specialist at Mizuho Securities, emphasizes that the market might increasingly attribute to Oracle the potential of a sustainable AI winner if it continues to succeed in the cloud sector. Oracle's stock price rose by up to 0.9% in early trading on Monday. Despite an impressive share price increase of about 35% this year, Oracle is valued lower compared to competitors like Microsoft and the Nasdaq 100 Index. Analysts on Wall Street see considerable growth potential in Oracle's underdog status. In June, company executives presented their strategic steps to expand cloud business in the AI sector, including 30 contracts worth more than $12.5 billion with companies like OpenAI. Additionally, partnerships were established with Microsoft and Google to ensure interconnectivity between the various cloud platforms. Oracle is expected to post revenue growth of 6.5% in the current quarter. For Oracle Cloud Infrastructure (OCI), an increase of 46% is predicted. Experts foresee that each quarter in this fiscal year will bring better results than the previous one, with OCI growth exceeding 50%. Guggenheim recently labeled Oracle as a "Best Idea," and Piper Sandler ranked the company among the "Big Four" in cloud computing, alongside Amazon, Microsoft, and Alphabet. Unlike its competitors, Oracle could record the highest growth, with a potential increase by a factor of 10 by 2032. While the current earnings season in the technology sector is mixed, the cloud business, driven by AI, shows robustness. Amazon and Alphabet reported strong results in the cloud sector, and Microsoft's Azure also recorded a notable increase of 29%. Although not all analysts are fully convinced by Oracle, optimists see this as a sign of undervalued potential. Ted Mortonson of Baird believes Oracle is experiencing unbroken demand and has significant growth potential. He suggests considering Oracle at least as an equal weight in the portfolio or even as a core holding.