Potentially reaching a valuation of $1 trillion by 2030, is that a possibility for Oracle?
In the booming AI landscape, seven tech giants currently boast valuations of a trillion dollars or more. But as the economy continues to flourish and AI potentially drives stock prices skyward, numerous companies could join this elite group in the future.
One underappreciated AI stock to watch is Oracle (ORCL 1.22%). Despite its recent surge, Oracle's valuation currently sits at $470 billion, a far cry from the $1 trillion mark. Yet, with its growing AI opportunities, could Oracle hit this milestone by the end of the decade?
Justifying Oracle's Growth Potential
Critics often argue that Oracle is a solid, yet traditional tech company, traditionally associated with its database services. However, its quarterly growth rates have been scratching the double-digit barrier – a necessary feat if the company hopes to capture the interest of growth investors.
For Oracle to soar past the $1 trillion mark, its growth needs to accelerate significantly. But where can it find this acceleration?
Firstly, AI chips and emerging technologies will drive demand for stronger infrastructure and database systems. As companies embrace AI, they will require robust systems to manage and analyze this data—powering Oracle's potential growth.
Secondly, Oracle is streamlining processes with its AI-driven applications like the Oracle Fusion Cloud Applications Suite. With more than 50 role-based AI agents, the suite can automate business processes across a wide spectrum of operations for enhanced productivity.
Thirdly, Oracle's recent agreement with Amazon to distribute its technology and software on Amazon Web Services (AWS) opens up another revenue avenue – cloud computing.
Lastly, consolidated data from its pipeline shows promising results. Oracle's remaining performance obligations for the first quarter of fiscal 2025 reached $99 billion, marking a 53% annual increase. This surging revenue backlog suggests a strong growth trajectory for the tech giant.
Achieving the $1 Trillion Goal
To achieve the $1 trillion mark, Oracle's stock would need to climb approximately 111%, an impressive feat that outperforms the market's average annual growth of around 10%. This would require a significant boost, possibly requiring Oracle to outpace the market by 6% annually over the next five years.
Oracle's strong position in the AI market and ever-growing demand from enterprise-level businesses further strengthen its chances of reaching this milestone. Analysts project that by 2026, 80% of enterprises will deploy generative AI applications or utilize generative AI application programming interfaces—a massive increase from less than 5% in 2022.
Oracle's forward price-to-earnings multiple of 27 is slightly lower than that of the Technology Select Sector SPDR Fund, a relatively modest valuation for this robust tech company. This modestly-priced stock makes it an attractive choice for investors who are bullish on AI and Oracle's continued growth potential.
In conclusion, Oracle is undoubtedly an AI stock worth considering. Despite its meteoric growth so far, its modestly-priced valuation and untapped AI opportunities make it a compelling prospect for long-term investors. And while reaching the $1 trillion milestone isn't a sure bet, Oracle's strong position in the AI landscape and market trends suggest that it's well on its way.
Investing in Oracle could yield significant returns as its growing AI opportunities position it to potentially surpass the $1 trillion valuation by the end of the decade. With the growing demand for robust infrastructure and database systems due to the adoption of AI by companies, Oracle's strong position in this market offers promising growth potential.
Finance analysts have projected that by 2026, 80% of enterprises will deploy generative AI applications or utilize generative AI application programming interfaces, creating a vast market for tech companies like Oracle. This presents an excellent opportunity for investors who are interested in the AI sector and believe in Oracle's continued growth.
