We recently compiled a list of the 9 Stocks Poised for Gains as AI Reaches New Heights in 2025. In this article, we are going to take a look at where Oracle Corp. (NYSE:ORCL) stands against the other stocks.
The equity market has climbed consistently over the past few years on the global economy recovering from the COVID-19-fueled slowdown. On the other hand, artificial intelligence has emerged as a key catalyst pushing the market to new heights. Tech-laden Nasdaq, home to some of the biggest AI investment plays, was up by 29% in 2024, adding to the 43% gain generated in 2023.
The big question at the start of the new year is whether the AI-driven rally is sustainable. Has the market run ahead of itself, as some stocks have increased by more than 200%, resulting in overstretched valuations? If history is anything to go by, investors have nothing to worry about, but be optimistic, as the equity market has always rallied each year after a 28% or more gain the previous year.
According to Wall Street analysts, the artificial intelligence industry is expected to reach its peak in 2025, with a $2 trillion increase in capital expenditures over the following three years. Governments around the globe pushing for friendly regulatory conversations on AI ethics and safety should spur innovation in the sector.
“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI Capex (spending) over the next 3 years,” said Wedbush Securities analyst Daniel Ives.
The fact that big tech companies are ramping up their AI investments to gain a competitive edge affirms AI rally sustainability. Wall Street experts expect several businesses to continue growing due to the untapped potential of revolutionary technology. As large-cap tech revises their AI capital expenditures upward, investors should position themselves for opportunities. Analysts at UBS expect AI capital expenditure to reach record highs of $280 billion in 2025, up from about $224 billion in 2024. The increase in AI capital expenditure is expected to result in game-changing innovations and development, which should support and fuel the AI rally. Nevertheless, the analysts have warned that AI revenues are likely to lag capital expenditures.
“Big tech firms will likely make more headway in monetizing their AI spending this year. While AI revenues are likely to again lag behind Capex in 2025, we see evidence that AI monetization is primed to improve sharply in 2025,” UBS said in a research note.
Amid the expected increase in AI capital expenditure, analysts at BNY Mellon Wealth Management believe that “AI’s role in the world will surpass that of other technologies that propelled earlier periods of tidal change.” Its increased roll should also strengthen bullishness in the equity market, broadening the gains, as in 2024.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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 Holders: 91
Oracle Corp. (NYSE:ORCL) is a technology company that offers products and services that address enterprise information technology environments. Its Oracle cloud software as a service offering includes various cloud software applications, including Oracle Fusion cloud enterprise resource planning (ERP) and Oracle Fusion cloud enterprise performance management. While the stock was up by more than 50% in 2024, Wedbush analyst Daniel Ives insists it has room for additional growth. The analyst expects Oracle Corp. (NYSE:ORCL) to benefit from the fast adoption of generative AI and large language models. Being a major player in the AI software sector, Oracle is able to generate significant free cash flow to distribute a $0.40 dividend per share, with a yield that is 1% above the industry average.
Overall ORCL ranks 3rd on our list of the stocks that are poised for gains as AI reaches new heights in 2025. While we acknowledge the potential of ORCL as an investment, 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 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 was originally published at Insider Monkey.