Oracle: A Top AI Infrastructure Investment Opportunity

Oracle is a favorite AI infrastructure play, according to the author, who is heavily invested in the AI sector and believes it is underestimated. The author suggests that Oracle's expertise in data management, cloud computing, and artificial intelligence makes it a strong player in the AI infrastructure market.

Title: Oracle's Bold Bet on AI Infrastructure

Oracle (NYSE:ORCL) is undergoing a transformative shift, pouring tens of billions into AI-focused infrastructure, a move that has the potential to reshape its role in the tech landscape. This aggressive expansion, while risky, is part of a broader strategy to catch up with the leading cloud providers and establish a significant presence in the AI infrastructure market.

Long-time cloud skeptic Larry Ellison has led this pivot, reversing his stance on cloud computing and investing heavily in Oracle Cloud Infrastructure (OCI). The company has secured major deals with TikTok, Nvidia (NASDAQ:NVDA), and OpenAI, with the OpenAI pact potentially becoming the largest cloud contract ever. This includes a five-gigawatt Stargate data center project, backed by the White House, which is already under accelerated buildout [1].

However, this ambitious expansion has come at a cost. Oracle recently posted negative annual cash flow for the first time since 1990, raising questions about the sustainability of its AI infrastructure gold rush [1]. Despite this, bulls argue that this is Oracle's "Nadella moment," a high-burn pivot that could yield substantial returns once the spending stabilizes [1].

Clay Magouyrk, the former AWS engineer now leading OCI, has become a rising force inside Oracle. With over 600 Amazon alumni joining his team and 23,000 employees reporting to him, Magouyrk is a name investors are watching closely [1]. Oracle's plan includes powering a 1.4-gigawatt facility in Texas entirely with gas generators, burning more than $1 billion annually just to keep it running [1].

AI workloads are now driving the majority of Oracle's cloud backlog, with training and inference demand surging across sectors [1]. TikTok was the turning point, outspending the entire rest of OCI combined, and OpenAI is set to top that. Nvidia is also tapping Oracle for GPU clusters in Japan and Indonesia [1]. Even Meta (NASDAQ:META) and Elon Musk's xAI are reportedly in talks with Oracle [1].

While Oracle's cloud arm still lags behind AWS, Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOG) in raw market share, its early bet on bare metal servers and aggressive pricing could carve out a profitable niche in AI infrastructure [1]. The runway looks long, but if Oracle sticks the landing, this may be the company's most dramatic reinvention yet [1].

References:
[1] https://finance.yahoo.com/news/1-billion-ai-bet-could-145851297.html
[2] https://finance.yahoo.com/news/oracle-rides-major-deals-openai-015102267.html