Oracle provides cloud-based software, database management systems, and enterprise solutions for businesses and governments. It started the year on a strong footing, and it surged higher this month following a few positive developments, including the company securing a $300 billion contract with OpenAI to build AI infrastructure, positioning Oracle as a critical player in the AI ecosystem. However, the big news was delivered by ORCL when they reported amazing cloud demand numbers, sending the stock up over +30% in one day, a huge move for a $US800bn behemoth. Putting the numbers into perspective, ORCL said it has $US455bn in remaining performance obligations, up +359% YoY and way ahead of expectations around $180bn.
Oracle has been one of the biggest benefactors of the AI boom thanks to its cloud infrastructure business and its access to Nvidia’s graphics processing units, or GPUs, which are both needed to run large workloads. Although competition is aggressive with other cloud providers like Microsoft, Amazon and Google for customers, ORCL is winning at least the current battle. There will be more chapters in this tale, but ORCL looks well-positioned at this stage.
- We like the risk/reward towards ORCL after its 18% retracement back towards $US280.
