Oracle Stock Surges 36% on AI Infrastructure Boom

On Wednesday, the stock price of Oracle, a major American software company, surged by nearly 36%, marking its largest single-day increase since 1992. This surge temporarily propelled the company's market capitalization to 933 billion dollars and positioned it as a leading contender in the AI infrastructure race. The surge also briefly made the company's co-founder the world's richest person, surpassing the CEO of Tesla.

OpenAI, the company behind ChatGPT, has signed a five-year supercomputing contract with Oracle worth 300 billion dollars. This deal requires a power supply of 4.5 gigawatts, equivalent to the output of two Hoover Dams or enough to power approximately 4 million American households. It is one of the largest cloud computing contracts in history.

This massive agreement underscores the escalating demand for computing power in the global AI industry and alleviates some market concerns about the industry's potential bubble. Oracle also serves prominent clients such as NVIDIA and TikTok, further solidifying its position in the AI infrastructure sector.

For the fiscal quarter ending August 31, Oracle's future contract revenue (RPO) reached 455 billion dollars, a fourfold increase year-over-year, and more than quadruple Google's cloud business backlog for the same period.

During the earnings call, the CEO stated that the company signed four contracts worth tens of billions of dollars with three clients during the quarter. The CEO also anticipated signing more contracts in the coming months, projecting that RPO could surpass 500 billion dollars in the near term.

The CEO forecasted that Oracle's cloud infrastructure division would grow by 77% to 18 billion dollars for the fiscal year and achieve a long-term goal of 144 billion dollars in annual revenue by the 2029/30 fiscal year, becoming a key driver in global AI infrastructure development.

Despite Oracle's earnings falling slightly below market expectations, its cloud business showed robust performance. Cloud infrastructure revenue grew by 55% to 33 billion dollars, exceeding analyst expectations of a 53% increase. Adjusted earnings per share were 1.47 dollars, slightly below the market average expectation of 1.48 dollars. Adjusted total revenue was 149 billion dollars, a 12% year-over-year increase, but slightly below market expectations.

The CEO noted that the current high investments are part of a long-term strategy, with capital expenditures expected to reach 35 billion dollars this year, significantly higher than the 26 billion dollars anticipated by Wall Street. Due to the high cost of expanding data centers, the market expects Oracle's free cash flow to remain negative for the second consecutive year.

To enhance operational efficiency, the company has extensively deployed AI technologies internally and conducted layoffs involving hundreds of employees over the past few months.

Oracle's promising outlook not only boosted its own stock price but also drove a broad rally in the AI supply chain. NVIDIA's stock price rose by 3.85%, and AI concept stocks in the U.S. market also rebounded, with CoreWeave rising by 16.88%, indicating increased market confidence in AI computing investments.

Additionally, Broadcom disclosed last week that it had secured a major AI client order, with market insiders confirming that the client was OpenAI. This indicates that global AI giants are accelerating their infrastructure investments, creating a sustained wave of capital expenditures.

This significant surge highlights Oracle's successful strategic transformation in the AI infrastructure sector. Traditionally known for its database software, Oracle has actively entered the cloud computing market in recent years, competing directly with Amazon AWS, Microsoft Azure, and Google Cloud.

The CEO emphasized, "In the coming years, Oracle's cloud infrastructure business will experience explosive growth. The contracts we have signed and are currently negotiating will drive the company into a high-growth trajectory."