- Firm’s AI potential underappreciated by investors, claims analyst
- ‘Outsized allocations’ to Nvidia chips relative to size
- Stock has rallied 44% year-to-date
Enterprise database giant Oracle (ORCL:NYSE) has been handed another analysts boost after UBS said it believes there’s still significant room for the company’s AI (artificial intelligence) story to unfold.
Shares in the Silicon Valley software firm have rallied 44% in 2023 as investors backed the $327.5 billion business to emerge as a major winner from AI technology.
UBS analyst Karl Keirstead has now thrown his backing behind the stock, pointing out several factors supporting his upbeat perspective.
‘We are increasingly confident that Oracle has carved out an under-appreciated edge in terms of its GPU (graphics processing unit) capacity as well as its OCI architecture, enough to attract new customers and drive OCI usage,’ the UBS analyst said in a new note to clients.
OCI stands for Oracle Cloud Infrastructure, the company’s collection of cloud computing tools that allow clients to build and run a range of advanced applications and services. Keirstead estimates around $2 billion of AI start-up investment this year, yet little of that has so far showed up in OCI usage data.
NVIDIA CHIP ADVANTAGE
The UBS analyst also believes Oracle has a ‘speed-to-deployment edge’ over some of the bigger players in the AI space thanks to its ‘outsized allocations’ of Nvidia (NVDA:NASDAQ) GPUs relative to its size, among the world’s most advanced microchips that are already powering AI technology developments.
Keirstead highlighted GPU supply constraints for several big cloud infrastructure providers like Microsoft (MSFT:NASDAQ) and noted that following a series of checks, Oracle appears to be benefiting from a GPU shortage could last for six to 12 months, the analyst says.
UBS is now telling clients to buy Oracle shares and has raised its target price from $120 to $140.
In June, Oracle reported quarterly earnings and revenue beats. First quarter 2024 results to end August are due on 14 September, with consensus pitched at $1.15 earnings per share on $12.4 billion revenue, implying 7.5% and 10% year-on-year growth respectively.
