July 24, 2024
Oracle Gains with AI-Boosted Cloud Infrastructure

Oracle Gains with AI-Boosted Cloud Infrastructure

Oracle shares jumped 9% on Wednesday as investors cheered a boom in demand for the company’s relatively low-cost cloud infrastructure services from artificial intelligence applications. If the gains hold, the company will add about $30 billion to its market valuation of $340 billion as of Tuesday’s market close. So far this year, the shares have gained 18%.

Image: Technova

Oracle’s Cloud Infrastructure Gains Traction

Oracle is intensifying its focus on its cloud infrastructure segment, positioning it as a key driver of growth through the provision of cloud computing and storage solutions to businesses. Despite this, it faces stiff competition from industry giants such as Alphabet’s Google, Microsoft, and Amazon.com. Oracle’s cloud infrastructure stands out as a cost-effective alternative compared to its competitors, attracting interest from venture capital-funded generative AI startups like Elon Musk’s xAI.

In a strategic move announced on Tuesday, Oracle revealed its collaboration with ChatGPT-maker OpenAI and Google Cloud to expand its cloud infrastructure offerings to customers. Evercore analyst Kirk Materne highlighted the significance of this partnership, stating that it enhances Oracle’s reputation as an AI platform while broadening its database distribution through the new association with Google.

Strategic Partnerships and Market Position

The partnership between OpenAI and Oracle enables OpenAI to utilize Microsoft’s Azure platform within Oracle’s infrastructure for specific purposes. Additionally, OpenAI’s new language learning models are undergoing training on a supercomputer constructed with Microsoft’s technology.

Despite Oracle’s positive strides, its fourth-quarter results fell short of expectations. The company faces stiff competition in its legacy database and enterprise resource planning (ERP) software business from more affordable alternatives, particularly as small- and medium-sized enterprises embrace digital transformation. Morningstar analyst Julie Sharma suggests that Oracle may be experiencing a significant shift away from its software offerings to competing database and ERP software providers due to diminishing switching costs amid widespread digital changes.

Despite these challenges, Oracle’s recent surge in stock value can be attributed to its increased involvement in the cloud infrastructure sector, fueled by strategic partnerships with prominent AI firms. Positioned as a cost-effective choice compared to established competitors, Oracle is leveraging its strengths in cloud services and AI applications to drive future growth. Despite obstacles in its traditional software domain, Oracle’s strategic focus on emerging technologies positions it well for long-term success.

Image by Roman from Pixabay

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