Oracle (NYSE: ORCL) AI Infrastructure Growth Outlook: Analysts Remain Cautiously Optimistic
Oracle is strategically positioned within the AI infrastructure market, driving its stock up 23% year-to-date. Analysts at Morgan Stanley project significant growth potential for Oracle Cloud Infrastructure (OCI) due to its strong positioning in the AI hardware space.
Despite the promising AI opportunity, analysts maintain an ‘equal-weight’ rating with a price target of $125. Oracle's management anticipates 50%+ year-over-year growth in FY25 Cloud Infrastructure revenue, fueled by the build-up of Remaining Performance Obligation (RPO).
Analysts estimate substantial revenue growth from AI infrastructure, reaching $10B+ in FY27, driven by additional GPU generations and the OpenAI partnership. However, cautious assumptions are made to account for utilization discounts and uncertainties surrounding newer GPU dynamics.
In addition to AI infrastructure, traditional infrastructure revenue is expected to grow steadily, with large customers like TikTok and Uber contributing to the growth. Oracle's partnership with OpenAI is projected to generate significant revenue, with a potential upside depending on various factors.
Analysts are closely monitoring Oracle's capital expenditure estimates, particularly related to GPU investments and execution risks. A risk-reward analysis presents three scenarios for Oracle, with price targets ranging from $95 to $180, based on different growth outlooks and investor sentiment.
In conclusion, Oracle's strategic positioning in the AI infrastructure market presents significant growth potential, but cautious optimism remains due to execution risks and uncertainties. Investors should carefully consider Oracle's growth prospects and market dynamics before making investment decisions.