Following his inauguration, President Donald Trump unveiled what he calls “the largest AI infrastructure project in history.” Dubbed Stargate, the $500 billion joint venture between OpenAI, Oracle (ORCL), and SoftBank (SFTBY) aims to build a network of data centers across the U.S., creating over 100,000 jobs. Trump emphasized the initiative as a critical step to surpass China in AI capabilities, leveraging emergency declarations to accelerate energy infrastructure development.
However, Tesla and SpaceX CEO Elon Musk, a prominent tech leader and Trump ally, expressed skepticism over Stargate’s financial backing. Musk argued that SoftBank and its partners lack the necessary funds to deliver on their ambitious promises, leading to a heated exchange with OpenAI’s Sam Altman.
Despite Musk’s criticisms, Oracle remains central to Stargate. As the primary cloud provider for TikTok, benefiting from past Trump executive orders, the company continues to play a pivotal role in this transformative AI initiative. Oracle has already begun constructing data centers in Texas and is targeting significant growth in its cloud and AI services.
For investors assessing the long-term potential of Stargate, Oracle’s integral role in the project underscores its strategic importance and positions it as a key player in advancing U.S. AI infrastructure.
Oracle Emerges as a Key Player in the AI Revolution
With a $521 billion market capitalization, Oracle (ORCL) is solidifying its position as a prominent entity in the rapidly expanding AI landscape. As one of the largest providers of enterprise-grade software and cloud solutions, Oracle is aggressively growing its cloud computing operations to capitalize on the rising demand for AI technologies. Its Oracle Cloud Infrastructure supercluster technology, capable of scaling up to 65,000 Nvidia (NVDA) H200 GPUs, sets a new industry benchmark for developers building advanced AI models.
Nvidia CEO Jensen Huang projects that companies tied to AI data centers, like Oracle, could benefit from $1 trillion in infrastructure spending over the next four years. This trend highlights Oracle's potential to exponentially grow its AI-related business.
The cloud software giant has also witnessed impressive momentum in its stock price, with shares climbing approximately 60% over the past year. This surge can be attributed to Oracle’s strategic investments in artificial intelligence and cloud computing.
Cloud Revenue and AI Demand Drive Strong Growth
On Dec. 9, Oracle reported its Q2 earnings, which were just shy of analysts' expectations on both revenue and earnings. Despite the miss, the company posted notable year-over-year revenue growth of 9%, reaching $14.1 billion. Much of this growth is due to its unshakeable position in the cloud segment, which surged 24% to $5.9 billion. Meanwhile, Oracle Cloud Infrastructure revenue saw a superb 52% YoY increase, hitting $2.4 billion.
Profitability remains impressive, with net income rising by 26% YoY to $3.15 billion. Adjusted EPS came in at $1.15, slightly missing the consensus estimate of $1.18 but showing 10% growth. Additionally, Oracle’s free cash flow stood at $9.5 billion over the trailing 12 months, while its cash and cash equivalents totaled $10.94 billion as of Nov. 30, 2024, ensuring strong liquidity for future growth initiatives.
Looking ahead, Oracle forecasted fiscal Q3 revenue growth of 7% to 9%, with cloud revenue expected to rise 23% to 25%. Adjusted EPS guidance for Q3 is projected between $1.50 and $1.54.
For fiscal 2025, Oracle reaffirmed its double-digit revenue growth guidance, led by a projected 50% expansion in cloud infrastructure revenue. Analysts currently estimate full-year revenue of approximately $59 billion and adjusted EPS of $6.15.
Recent News About Oracle
On Jan. 21, Oracle secured a legal victory in the Delaware Supreme Court, which upheld a lower court’s decision in favor of Ellison and CEO Safra Catz. The litigation pertained to Oracle’s acquisition of NetSuite, with allegations questioning the fairness of the deal being dismissed. This ruling removes a significant legal hurdle for Oracle.
On Jan. 22, Oracle announced plans to expand its investment in Abu Dhabi to address surging demand for AI and cloud services in the UAE. Senior Vice President Nick Redshaw revealed a fivefold increase in regional investment, with Oracle already operating cloud regions in Abu Dhabi and Dubai.
Analyst Opinions and Final Thoughts
Wall Street analysts are betting on this AI behemoth, with a consensus rating of “Moderate Buy.” Among the 33 analysts covering Oracle, 21 have issued a “Strong Buy” rating, 11 have a “Hold” rating, and one has a “Strong Sell” rating. The mean price target for ORCL is $194.68, approximately 4.5% above the Jan. 23 closing price.
Oracle emerged as a major winner following the announcement of the $500 billion Stargate project. Its shares surged 7% after the news, underscoring investors’ confidence in the company’s growth potential. Operating on a leaner budget than its peers, Oracle maximizes efficiency by expertly managing data center expenditures.
With its strong fundamentals, expanding presence in high-profile AI initiatives, and compelling valuation metrics, Oracle is uniquely positioned for long-term growth in the AI sector.
