Oracle's Cloud Infrastructure Powerhouse: Riding AI's Surge and Onshoring Tailwinds

Oracle Corporation (ORCL) is positioned at the epicenter of two seismic shifts reshaping global technology: the insatiable demand for artificial intelligence (AI) infrastructure and the geopolitical push for onshoring. While its stock has surged 62% over the past year, the company remains underappreciated by institutional investors—a gap that presents a compelling opportunity for forward-thinking investors.

The AI Infrastructure Gold Rush
Oracle's cloud infrastructure (IaaS) revenue hit $2.4 billion in Q2 2025, a blistering 52% year-over-year increase. The driver? AI's hunger for compute power. GPU consumption on Oracle Cloud Infrastructure (OCI) skyrocketed by 336%, as customers like Meta (META) leverage OCI to train generative AI models at a fraction of the cost of competitors. Oracle's AI SuperComputer, now supporting 65,000 NVIDIA H200 GPUs, has become a critical engine for industries from healthcare (drug discovery) to agriculture (predictive analytics).

This growth isn't just transactional. Oracle's Remaining Performance Obligations (RPO)—a metric reflecting future revenue commitments—jumped to $97 billion, a 49% year-over-year rise. This signals long-term customer lock-in, as enterprises increasingly rely on OCI's cost efficiency and specialized AI tools.

Onshoring: A Tailwind Ignored by the Market
The Biden administration's CHIPS Act and global data localization laws are accelerating demand for domestically hosted infrastructure. Oracle's global network of 47 data centers—including facilities in regions like Europe and Asia—positions it to capitalize on this trend. Unlike cloud giants like AWS (AMZN) or Azure (MSFT), Oracle has aggressively expanded in markets where onshoring is mandatory, such as the EU's GDPR-compliant zones.

The payoff? Oracle's cloud revenue grew 12% in Europe/Middle East/Africa and 15% in Asia-Pacific, outpacing its already strong 9% growth in the U.S. This geographic diversification insulates Oracle from regional regulatory risks while aligning it with corporate demand for localized AI training.

The Energy-Infrastructure Nexus: Oracle's Secret Weapon
Investors often overlook Oracle's operational efficiency in data centers. OCI's infrastructure is designed to run AI workloads at 50% lower energy costs than competitors, thanks to custom-built hardware and liquid cooling systems. This edge becomes critical as AI's carbon footprint grows—a pain point for regulators and corporate ESG goals.

Oracle's valuation lags peers despite comparable cloud growth. Investors have yet to price in its AI/energy advantages.

Undervalued and Underowned: A Contrarian Play
Despite its growth, Oracle remains underappreciated by institutions. While Vanguard and BlackRock hold significant stakes, hedge fund ownership dropped from 105 funds to 97 in Q1 2025, a sign of complacency. The average portfolio allocation to Oracle fell by a stunning -103.89% quarter-over-quarter, suggesting a rotation into more “fashionable” AI stocks.

This underownership creates a buying opportunity. Oracle's stock trades at 18x forward P/E, far below the 30x+ multiples of pure-play AI firms. Meanwhile, its $9.5 billion in free cash flow and $0.40 quarterly dividend provide a margin of safety.

The Investment Thesis
Oracle is a compound growth story with three catalysts:
1. AI Compute Demand: The global AI infrastructure market is projected to hit $250 billion by 2028, and Oracle is already a leader in cost-efficient GPU scaling.
2. Onshoring Tailwinds: Regulatory changes will drive multiyear contracts for Oracle's geographically diverse data centers.
3. Undervalued Stock: Its P/E discount to cloud peers and low institutional ownership suggest a re-rating is overdue.

Conclusion
Oracle's cloud business isn't just growing—it's evolving into a strategic necessity for enterprises racing to deploy AI at scale. With underappreciated energy advantages and a shareholder base primed for a re-engagement, now is the time to buy. The stock's $235 price tag (as of July 2025) offers a rare chance to invest in a $660 billion company that's still flying under Wall Street's radar.

Investors who act now may well look back at this moment as the dawn of Oracle's next decade of dominance.