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For over a century, the United States has been at the forefront of the global economy, giving rise to some of the most valuable companies in history. The journey began in 1901 with United States Steel, which was the first company to reach a $1 billion valuation. Fast forward to 2018, and Apple made headlines as the first business to hit the $1 trillion mark.
Currently, Apple leads with a staggering market valuation of $3.3 trillion. Since its historic achievement, several other American corporations have entered the trillion-dollar ranks, including Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Berkshire Hathaway. Although Tesla and Broadcom were also part of this elite group, they have recently experienced significant downturns in their stock prices.
Looking ahead, Oracle (NYSE: ORCL) stands out as a potential contender to join the $1 trillion club. With a valuation of $403 billion at present, Oracle’s cutting-edge data center infrastructure is well-positioned to cater to the rapidly expanding field of artificial intelligence (AI), and management predicts a tenfold increase in this segment in the long run.
Investors contemplating a stake in Oracle could potentially see a 148% increase in their investment if it reaches the coveted $1 trillion valuation.
Creating an AI model encompasses two essential phases: the training phase and the inference phase. During training, vast amounts of data are fed to the model, enabling it to learn. In the inference phase, the model processes user inputs to generate responses, as seen in chatbot interactions. Both phases demand significant computational power, which developers often source from companies like Oracle.
Oracle’s data centers are equipped with advanced graphics processing units (GPUs) from prominent suppliers like Nvidia and Advanced Micro Devices, tailored to handle AI tasks. Notably, Oracle is constructing a formidable array of 64,000 Nvidia Blackwell GB200 GPUs, positioning it to offer one of the largest and most powerful clusters available in the data center sector.
Having access to a larger volume of chips allows developers to process data more efficiently, leading to the deployment of more sophisticated AI models. Beyond scale, Oracle benefits from its unique random direct memory access (RDMA) networking technology, which significantly accelerates data transfer compared to traditional Ethernet networks—resulting in considerable cost savings for developers who pay for computing power by the minute.
In recent developments, Oracle opened its 101st cloud data center during the third quarter of fiscal 2025, yet demand still far exceeds supply. Chairman Larry Ellison reported a staggering 244% increase in GPU usage dedicated to AI training over the last year, alongside substantial demand for inference workloads.
The CEO of Nvidia, Jensen Huang, has projected that emerging AI reasoning models will require up to 100 times more computational power than their predecessors. This burgeoning demand for data center capacity indicates that Oracle’s ambition to scale its operations to between 1,000 and 2,000 cloud regions is well-founded.
Currently, Oracle’s overall revenue reached $14.1 billion during the third quarter of fiscal 2025, with the Oracle Cloud Infrastructure (OCI) segment—housing its AI data centers—accounting for $2.7 billion. Despite a modest 6% year-on-year growth in total revenue, OCI reported a remarkable 49% growth rate, highlighting it as the fastest-growing sector within the company.
As Oracle expands its data centers to meet demand, significant revenue growth is anticipated. CEO Safra Catz forecasts OCI to exceed 50% growth for the entirety of fiscal 2025, with an even higher growth rate expected for fiscal 2026.
To illustrate Oracle’s promising trajectory, its remaining performance obligations (RPOs) surged by 63%, reaching a historical peak of $130 billion during the third quarter. These obligations act as a revenue backlog, indicating future earnings potential largely driven by the need for AI training and inference capabilities.
Earnings per share (EPS) over the last four quarters amounted to $4.26, placing the company’s stock at a price-to-earnings (P/E) ratio of 33.8, which aligns with valuations of other prominent AI cloud service providers such as Microsoft and Amazon.
Looking to the future, analysts predict that Oracle’s EPS could grow to $6.78 for fiscal 2026, which implies a forward P/E ratio of 21.1. If this growth materializes, Oracle’s valuation could reach $640 billion, bringing it closer to the $1 trillion threshold over the next five years with just a 9.3% annual EPS growth—an attainable goal considering its predicted 13% growth for fiscal 2026.
Automated processes within Oracle’s data centers assist in minimizing operating costs. Consequently, the company expects improved profit margins as it scales the OCI, further enhancing its EPS projections. With aspirations to expand its data center network tenfold, Oracle is well-positioned for substantial long-term growth.
In conclusion, Oracle appears to be on a solid path toward eventual inclusion in the $1 trillion club, making its stock a compelling choice for investors seeking diversification and growth potential.
Source
finance.yahoo.com