Oracle Corp. Sees Resurgence Amid AI Investment Surge
(Bloomberg) — Oracle Corp. shares experienced a notable rebound on Monday, buoyed by augmented capital expenditure from U.S. technology titans, which alleviated concerns surrounding the impact of artificial intelligence advancements on the company.
The renowned software firm’s stock surged by as much as 12%, marking its most substantial intraday leap since September 10. This uptick followed Amazon.com Inc.’s commitment to invest $200 billion this year in data centers, semiconductor technology, and related infrastructure.
Despite this positive movement, Oracle’s stock remains approximately 50% below its highs from September.
“Software is not obsolete,” affirmed D.A. Davidson analyst Gil Luria in a recent note, as he upgraded Oracle’s stock from neutral to buy. “We posit that businesses will persist in investing in Oracle’s offerings, unaffected by ephemeral trends.”
Widespread fears regarding AI’s potential to diminish demand for software solutions have adversely impacted the sector in recent weeks, leading to a roughly 28% decline in the IShares Expanded Tech-Software Sector exchange-traded fund from its zenith.
While such apprehensions are expected to linger, there is a burgeoning belief that a portion of the anticipated $650 billion in AI tool investments from Amazon, Alphabet Inc., Meta Platforms Inc., and Microsoft Corp. may also favor software enterprises.
In Oracle’s scenario, D.A. Davidson has adopted a more bullish stance regarding the company’s rapport with OpenAI, the creator of ChatGPT, which has been scrutinized for its profitability challenges and the necessity for accelerated growth to accommodate its extensive spending obligations.
“We are increasingly optimistic about OpenAI, propelled by strategic shifts, the introduction of new models, competitive pressures from Google’s rivals, and advancements in its fundraising endeavors,” Luria commented.
However, opinions on Wall Street are not universally favorable. Melius Research analyst Ben Reitzes expressed reservations, noting that Oracle “fails to generate cash, and there is no assurance that OpenAI will outpace competitors such as Anthropic and Google.”
Nonetheless, Oracle continues to strategize on raising between $45 billion and $50 billion this year to enhance its capacity to fulfill contracted demands from its largest cloud clientele, which includes entities like Advanced Micro Devices Inc., Meta, and Nvidia Corp.
Reitzes remarked that while he respects Oracle’s ambitions, he anticipates potential challenges ahead as both debt and equity may pose significant constraints for the foreseeable future.
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