Oracle: Tech Giant on the Verge of the Trillion-Dollar Club
A handful of companies -- from Nvidia to Microsoft -- have seen their market value soar from the billions of dollars in recent years into the trillions. In fact, Nvidia reached a major milestone this summer when it became the first company to surpass the $4 trillion level. It's important to note that nearly every player with a valuation of $1 trillion or more operates in the high-growth area of artificial intelligence (AI).
This technology has helped revenue roar higher at these companies, and considering the growth forecasts for the AI market, this trend should continue for quite some time. Oracle has already benefited in a big way from the AI boom, and according to the company's forecasts, an enormous amount of growth lies ahead. They are strategically positioning themselves within the AI infrastructure and application landscape, which is where future gains will likely originate.
Oracle wowed the market this week with its predictions for growth, and the stock surged, adding $244 billion in market cap in just one trading session. The expectation is that Oracle will continue to leverage their expertise in database management to capture a significant portion of the AI market, potentially making it the next member of the trillion-dollar club -- and this could happen soon. Let's zoom in on this company that's rocking the AI market.
What's the Trillion-Dollar Club?
First, though, a quick note on the trillion-dollar club. It isn't exactly an official club with a particular structure -- instead, it's a way investors and analysts often refer to companies that have reached the level of at least $1 trillion in market capitalization. As mentioned, most of these players, unsurprisingly, considering the strength of the AI boom, are in the technology industry. Joining this club signifies market dominance and often attracts further investment.
The AI-driven growth I'm focusing on isn't coming from a young start-up that's recently roared onto the scene. Oracle has been around for almost 50 years, progressively building out its expertise. It started out as a database management specialist, and today it offers cloud infrastructure and other related products and services, too -- all of these elements, together, have created an AI powerhouse. The company? Oracle (ORCL 35.96%).
In the latest quarter, Oracle saw cloud infrastructure revenue soar 55%, and remaining performance obligations -- or contract value yet to be recognized -- skyrocket 359% to $455 billion. On top of this, the company predicted cloud infrastructure revenue will increase 77% to $18 billion in this fiscal year, then will progress over the coming four years to the following levels: $32 billion, $73 billion, $114 billion, and $144 billion. These figures indicate significant forward momentum in their cloud and AI services.
Several Multibillion-Dollar Customers
Oracle expects to win several multibillion-dollar customers in the coming months to set it on the path toward those goals. While Oracle faces competition from other cloud providers, the company sets itself apart thanks to its ability to leverage the strength of its database offering and AI -- large language models can be put to work on customer-specific questions without compromising security or privacy. Oracle also offers great flexibility to customers, even the ability to leverage the Oracle database across any cloud. Their database expertise is a key differentiator, as it is highly sought after in training AI models.
Customers have rushed to Oracle for the training of AI workloads, and now the company sees potential for massive growth in AI inferencing. So, there are a lot of reasons to be optimistic about Oracle right now, especially considering that analysts expect today's billion-dollar AI market to reach into the trillions by the next decade. This signals AI isn't just a short-term trend, but may be a lasting revolution. Oracle's strategic focus on secure and flexible AI solutions positions them well for continued growth in this evolving landscape.
My Prediction
Oracle closed at about $328 on Sept. 10 after gaining more than 35% in one trading session. At this level, an 8.5% increase to $356 would push it to a $1 trillion market value -- The expectation is this sort of movement, in light of Oracle's solid growth outlook, could easily happen in a matter of days. It's important to keep in mind that stock prices are also affected by overall market sentiment and external economic factors.
What does this mean for you as an investor? Oracle's climb toward $1 trillion – or even past that level – is positive as it shows the investment community believes in this growth story. It also may increase the weighting of the stock in market cap-weighted indexes like the S&P 500. As a result, funds tracking the benchmark would have to boost their holding of Oracle accordingly. This increased demand can further drive up the stock price.
A gain in market cap, though, isn't a reason on its own for buying a stock. You wouldn't want to pile into Oracle just because it reaches a certain level. However, Oracle's current valuation reflects its strong growth prospects in a booming industry, making it a compelling long-term investment. Whether Oracle enters the trillion-dollar club soon or not, it may be a fantastic stock to buy and hold as this AI boom marches on, driven by solid execution and strategic positioning in the AI ecosystem.
TH
