Adam Spatacco, The Motley Fool
5 min read
In This Article:
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For the last few years, the most popular AI stocks were chip companies and cloud hyperscalers.
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However, infrastructure services are beginning to emerge as a new opportunity in the AI realm.
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Oracle provides critical cloud-based infrastructure services and sees robust growth ahead.
For much of the last two years, a small concentration of mega-cap artificial intelligence (AI) stocks have played a major role in sending the stock market to new highs. Among the biggest winners were Nvidia, Amazon, Alphabet, Microsoft, and Meta Platforms.
Nvidia's graphics processing units (GPUs) are considered the industry gold standard for generative AI hardware, and cloud hyperscalers and others in big tech just couldn't stop buying these pricey chipsets. While GPUs are still very much in demand, I think a new chapter is quietly unfolding within the broader AI storyline.
Let's explore why the AI opportunity is more than just chips. From there, I'll go into detail about why I see Oracle (NYSE: ORCL) as a breakout candidate to lead the next bull market.
When the AI revolution kicked off about two-and-a-half years ago, Nvidia was the default option when it came to purchasing GPUs. But over the last couple of years, competition has started to creep into the semiconductor market.
Advanced Micro Devices is Nvidia's most direct rival in the AI data center market. However, all the cloud hyperscalers that I referenced above are also investing heavily into custom silicon in an effort to migrate from an AI architecture that's entirely built on Nvidia's backbone.
In my view, GPUs aren't becoming less important by any means. However, with the introduction of so many new chips, I do think the semiconductor landscape is becoming commoditized. At this point, AI developers know that they need to keep buying chips. I think the bigger use case for these companies is becoming rooted in figuring out how to manage these GPU clusters amid ongoing AI infrastructure buildouts.
This is where Oracle identified an opportunity early on, and the company's results are starting to show a clear pattern.
On June 11, Oracle reported earnings results for its fiscal fourth quarter and full 2025 year (ended May 31). For the year, Oracle generated $57.4 billion in revenue -- an increase of 8% year over year. I understand that this growth rate pales in comparison to Nvidia and its "Magnificent Seven" peers.
