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Investing.com - DA Davidson has reiterated its Neutral rating and $300.00 price target on Oracle (NYSE:ORCL), currently trading at $318.95, as the firm evaluates OpenAI’s growth trajectory and its implications for Oracle’s business. The tech giant, with a market capitalization of $895.2 billion, has seen its stock surge 47% in the past week. According to InvestingPro analysis, Oracle is currently trading above its Fair Value.
The research firm notes that while OpenAI continues to be "a key winner from the explosion of growth in AI," several contextual factors should be considered when evaluating Oracle’s position in the AI infrastructure landscape. With annual revenue of $59 billion and multiple valuation metrics at elevated levels, InvestingPro subscribers can access over 15 additional key insights about Oracle’s valuation and growth prospects.
DA Davidson points out that OpenAI’s organizational structure as a not-for-profit is currently limiting its ability to utilize capital raised in March, with Microsoft holding right of first refusal on OpenAI compute needs, suggesting Microsoft will likely "continue to handle most of its inference going forward."
The firm highlights OpenAI’s existing commitments to other providers, including a "$15bn commitment to CoreWeave" and arrangements with Google Cloud, alongside the Oracle deal that includes Stargate involvement.
DA Davidson questions whether OpenAI could realistically spend "$100bn on Oracle in 2030 as only a portion of its compute spend," as this would require OpenAI to grow from "current $12bn ARR" to over "$300bn of revenue" to justify such expenditure levels.
In other recent news, Oracle has secured a $300 billion cloud contract with OpenAI, marking one of the largest cloud agreements ever signed. This deal, set to unfold over approximately five years, underscores the increasing investment in AI data centers. Analysts have responded to Oracle’s developments with several firms raising their stock price targets. BNP Paribas Exane increased its target to $377, citing enhanced Oracle Cloud Infrastructure revenue targets. TD Cowen raised its target to $375, noting a significant quarter-over-quarter build in remaining performance obligations driven by large AI contracts. BMO Capital also raised its target to $345, highlighting Oracle’s strong bookings and a 359% year-over-year growth in remaining performance obligations. Piper Sandler adjusted its target to $330, attributing the increase to Oracle’s momentum in AI infrastructure. These updates reflect a positive outlook among analysts for Oracle’s future performance.
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