We recently published a list of the 12 Best AI Stocks Leading the ‘Big Tech Race’ to $4 Trillion According to a Famous Wall Street Analyst. Since Oracle Corp (NYSE:ORCL) ranks 7th on the list, it deserves a deeper look.
Wedbush Securities analyst Dan Ives has said in a fresh note that major tech giants are now running in a “race” to capture the $4 trillion AI market, calling GPUs the new “oil” or “gold” in the technology sector. Ives said that the AI “party” is just getting started and the clock is showing “9p.m. in a party going till 4 a.m. with the rest of the tech world now joining.” Ives thinks spending on GPUs and data centers is the “only game in town.” Ives thinks the “first wave” of AI benefited major technology giants leading the AI race, with the second, third and fourth “derivatives” beginning to show trickle-down effects on other companies.
In a separate investing event, Ives recently predicted that the AI-led bull run can last for another two to three years, saying in a year from now investors will be looking at $3 trillion to $4 trillion market caps for major tech companies.
“The tech bull market is just starting,” Ives reportedly said.
In his latest note Ives highlighted several stocks which he believes can benefit from the AI revolution. In this article we take a detailed look at these stocks and discuss their AI-related growth catalysts and see whether or not they are sound long-term investments. With each stock we have mentioned hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 96
Oracle Corp (NYSE:ORCL) is one of the stocks Dan Ives is bullish on following the AI revolution and its trickle-down effects. Ives named Oracle Corp (NYSE:ORCL) among the stocks he thinks could benefit from the AI wave.
Oracle Corporation (NYSE:ORCL) earlier this month posted weak fiscal Q4 results, but the stock remained steady after the company said it signed multiple AI deals with leading horses in the industry. Oracle Corporation (NYSE:ORCL) said it reached a deal with OpenAI and Microsoft to extend Azure Al platform to Oracle Cloud Infrastructure (OCI) to provide additional capacity for OpenAl. Oracle also revealed a partnership with Google after which Google Cloud will offer Oracle Cloud Infrastructure database services and high-speed network interconnect.
Despite the weak fiscal Q4 results, Oracle’s Cloud business was strong. Cloud infrastructure (IaaS) revenue jumped 42% year over year. For fiscal first quarter, Oracle Corporation (NYSE:ORCL) expects its revenue to rise by 6% to 8% in constant currency, while adjusted EPS growth is expected in the range of 11% and 15%. One of the metrics in Oracle’s Q4 report that impressed the Street was Remaining Performance Obligations (RPOs), which surged 44% YoY in the period. Management expects 39% of this amount to come in the next twelve months. Oracle’s Cloud is exposed to the IaaS market, which is projected to grow to $738.11 billion by 2032, according to some estimates. Oracle Corporation (NYSE:ORCL) management said the company is building data centers and analysts believe the company’s automated OCI services will grow amid rising demand. Given Oracle’s partnerships with major AI players and its dominance in the niche OCI market, it’s forward P/E ratio of 22.03 looks attractive when compared to peers.
Madison Sustainable Equity Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its fourth quarter 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) reported a disappointing second quarter due to supply constraints. Cloud revenue was below expectations as Oracle made planning decisions to accommodate some large-scale Oracle Cloud Infrastructure (OCI) clients that take longer to bring online. We continue to believe that Oracle has a unique position in Generative AI workloads and continue to like its position and strategy.”
Overall, Oracle Corp (NYSE:ORCL) ranks 7th on Insider Monkey’s list titled 12 Best AI Stocks Leading the ‘Big Tech Race’ to $4 Trillion According to a Famous Wall Street Analyst. While we acknowledge the potential of Oracle Corp (NYSE:ORCL), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Oracle Corp (NYSE:ORCL) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
