Artificial Intelligence (AI) stocks have boosted the overall market over the past few years as investors bet on AI's ability to handle the growth of companies. The AI market, set to reach trillions of dollars in a few years, is still in its early stages, and is currently the most viewed player of today. nvidia and software companies Palantir Technologiesit's not the only one that makes a profit.
In fact, Cloud Company Oracle (orcl -2.20%)) You could be a surprise winner of the AI revolution. Here's why:
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Oracle's growth since the 1970s
So, first of all, a small background from Oracle. The company has been around since the late 1970s and has become a leader in database management software. However, Oracle is not static and has since expanded to a variety of areas. For example, in 2013, they brought their databases to the cloud, and more recently they have provided cloud infrastructure to AI customers.
Over time, this has helped Oracle increase both annual revenue and net profits to billions of dollars. In recent years, both have taken off amid the AI boom.
ORCL revenue (annual) data from YCHARTS
Customers come to Oracle for cloud capacity. What sets this player apart is its extremely flexible. For example, Oracle offers Multicloud services that allow users to use services from various cloud providers simultaneously. Another option, Oracle Alloy, allows customers to manipulate their own clouds for their customers.
In addition to this, Oracle offers a complete portfolio of AI-driven cloud applications, helping everything from supply chain management to customer relationships.
Now, let's consider some clues that suggest Oracle will be the winner of the surprising AI revolution. First, Oracle hasn't been in the spotlight as much as the Technology Giants, known as the epic Seven, so he says he's the winner of “surprise.” These players led the market profits last year, with mostly large in the AI space.
Oracle's AI Business
Meanwhile, Oracle's AI business is growing dramatically, pushing it into those leagues of AI leaders. Use the recent quarter as an example. Oracle's cloud infrastructure revenues rose 52% to $3 billion, with all other segments generating double-digit growth as well.
But one of the most encouraging numbers of all is the remaining performance obligations (RPOs), or the revenue that has not yet been billed from a signed contract. In the quarter, Oracle said its RPO skyrocketed 41% to $138 billion.
Finally, another clue that makes me feel optimistic about the future is a comment from Chairman and Chief Technology Officer Larry Ellison. In a recent revenue call, Ellison said the demand for cloud infrastructure “is almost insatiable.” He added: Ellison provided anecdotes, saying that recent customers requested all Oracle's available capacity, regardless of where they were located.
What technology leaders say
It is important to note that messages from other large tech companies support Ellison's comments. Major chip designers nvidia We talk about rising demand for chips and players like AI players. Meta Platform and alphabet I repeated my billions of dollars of AI spending plans for the year. AI software analytics firm Palantir has also spoken about unrelenting demand in recent quarter. All of these demonstrate the strength of AI demand. And the aforementioned growth forecast for the AI market suggests that momentum should last for quite some time.
Now let's consider the Oracle evaluation. Today, stocks trade earnings estimates 29 times before, down from a high above the average level over the past year.
However, remembering the following is key: Revenues are rising sharply, and the current valuation is reasonable for growth stocks, and the points mentioned above should support further growth. All this means that Oracle, the least-popular company in this AI race, could become a surprising winner as the AI revolution unfolds.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool's board of directors. Adria Cimino has a position in Oracle. Motley Fool has locations for Alphabet, Meta Platforms, Nvidia, Oracle, and Palantir Technologies, and is recommended. Motley Fools have a disclosure policy.
