Boosted By AI Demand, Oracle’s Cloud Business Is On The Rise

(CTN News) – Oracle (ORCL.N) shares soared 13% on Tuesday, boosted by signs the firm was making progress in its plan to grab a share of the cloud-computing market, thanks to its tie-up with one of the world’s largest AI chip companies.

Additionally, the database megacorp teased that it would have joint announcements with Nvidia (NVDA.O) coming up next week. These announcements would likely come at the chip maker’s GTC developer conference, which runs from March 18 to 21.

To compete with industry heavyweights Amazon.com and Microsoft, the company has worked hard to present itself as a low-cost cloud provider and has invested billions of dollars in Nvidia chips to ensure a competitive edge.

In addition to this focus on generating revenue for its cloud business in the third quarter, Oracle was also able to increase its sales backlog by 29%, which was a result of its partnership with Nvidia, which allows cloud customers to access the supercomputers.

Analysts at Piper Sandler, in a report aimed at clients, said in a client note this week that Oracle Cloud momentum has re-accelerated following disappointing cloud results in the previous two quarters.

Taking a look at its premarket share price of $129.67, the company was on track to add nearly $40 billion to its market value by the end of the week.

At least 14 analyst have raised their price targets on Oracle shares,

Pushing the median price target to $135.50, according to LSEG data. According to LSEG data, Oracle is trading at a 19-to-one price-to-earnings multiple, compared with a 31.2 price-to-earnings ratio for the software and IT services sector as a whole.

Shares of the company have actually underperformed those of its big, more established rivals such as Microsoft until now, as investors are concerned that a shortage of data center capacity and uncertainty over the economy are weighing on the company’s future growth.

Safra Catz, Oracle’s CEO, dispelled some of these concerns on Monday, saying the company “signed a number of large contracts this quarter and has many more in the pipeline”.

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