Investors bullish on the multi-year boom in the artificial intelligence sector are wary about Oracle (ORCL). Up until recently, investors did not think of ORCL stock as an AI play. In September, that changed.
Oracle issued a bullish forecast on RPOs, or bookings. ORCL stock surged from around $240 to a high of $345.72. Last week, shares closed at $291.31.
On October 17, the firm issued a glowing forecast at analyst day. It expects $225 billion in revenue in fiscal year 2030. To get there, CAGR needs to grow by 31%. Analysts reacted, with Piper Sandler raising its price target to $380, up from $330.
Co-CEO Clay Magouyrk split the costs of an AI build between land, data center, and power. That included the buildings that generate power. That accounted for 35% of the service cost. Compute, networking, and storage account for approximately 65% of costs.
Risks
Oracle’s revenue forecast depends heavily on one customer. This increases the risk of the firm not meeting expectations should the customer cut its demand. OpenAI accounts for around two-thirds of the $500 billion in backlog.
On Oct. 14, Oracle announced a partnership with AMD (AMD). It would deploy 50,000 AMD-powered AI servers starting in the second half of 2026.
Your Takeaway
For now, few doubt that Oracle will disappoint shareholders. The short interest is 0.65% even though the stock’s P/E is 67 times.
