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On Thursday, shares of Oracle Corporation (NYSE:ORCL) experienced a significant increase, surging 7% following the announcement of the Stargate Project, a major initiative to enhance domestic AI leadership in the United States. This surge contributed to Oracle's impressive 15.47% gain over the past week and 66.51% return over the last year. Microsoft Corporation (NASDAQ:MSFT) also saw its stock rise by 4%, along with other technology stocks reacting positively to the news.
The Stargate Project, jointly announced at a White House press conference, involves a collaboration between technology giants including SoftBank (TYO:9984), OpenAI, Oracle, and MGX, with funding commitments ranging from $100 billion to $500 billion. The project will focus on AI infrastructure, with SoftBank and OpenAI taking lead roles in operations and finances, respectively. SoftBank CEO Masayoshi Son will serve as the chairman of the project.
For Oracle, the implications of the project are multifaceted. While RBC Capital analysts express skepticism regarding the incremental impact on Oracle's financial targets for FY26 and FY29, the announcement is seen as a positive sign of the company's relationship with the new administration. According to InvestingPro analysis, Oracle currently trades at a P/E ratio of 43.83, suggesting premium valuation levels compared to its historical average. Oracle had previously committed to data center expansions in Texas, which are currently underway in Abilene. Additionally, Oracle's involvement in maintaining TikTok's operations in the U.S. has been viewed as a factor in the recent uplift of its stock. InvestingPro's Fair Value analysis indicates that Oracle shares are currently overvalued.
Microsoft, characterized as a technology partner rather than a funding partner in the Stargate Project, is also perceived to benefit from the initiative. Despite reports of a separate $100 billion commitment by Microsoft and OpenAI for data centers, RBC Capital does not see this as a displacement by Oracle. The partnership is viewed as slightly positive for Microsoft, particularly due to its association with OpenAI and the potential for strengthening domestic AI capabilities.
The market response to the Stargate Project reflects broader enthusiasm for technology companies that are poised to play a significant role in advancing AI infrastructure and maintaining U.S. leadership in this critical field. Oracle, with its market capitalization of $516.21 billion and steady revenue growth of 6.4% over the last twelve months, exemplifies this trend. The IGV, an index tracking the performance of North American technology stocks, also rose by 2% amidst the news. For detailed analysis and 16 additional ProTips about Oracle's performance and outlook, visit InvestingPro, where you can access comprehensive Pro Research Reports covering 1,400+ top stocks.
More details on the Stargate Project and its implications for Oracle and Microsoft are expected to be discussed in Oracle's upcoming F3Q25 earnings call. The project underscores the importance of strategic partnerships and government support in the rapidly evolving technology landscape.
In other recent news, Oracle Corporation has been involved in a series of significant developments. The company recently emerged victorious in a Delaware Supreme Court case related to its acquisition of NetSuite Inc. This legal affirmation removes a cloud of uncertainty that had been hovering over Oracle's executive leadership and puts to rest the disputes stemming from the NetSuite deal.
Oracle has also been part of a joint venture with tech giants OpenAI, Softbank (OTC:SFTBY), and others, aiming to fund AI infrastructure. The initial commitment for this venture is $100 billion, with plans to invest up to $500 billion over the next four years. The first project under this venture will be a data center located in Texas.
On the analyst front, Mizuho (NYSE:MFG) Securities reiterated its Outperform rating for Oracle, expressing confidence in the company's market position. Cantor Fitzgerald also initiated coverage on Oracle with an Overweight rating, highlighting the company's strong position in the data management sector and the growth of its AI capabilities through the Oracle Cloud Infrastructure (OCI).
However, Monness, Crespi, Hardt recently downgraded Oracle's shares from Neutral to Sell, influenced by Q2 results and concerns over Oracle's intention to double its capital expenditures in FY25. Despite this, Oracle reported a 9% increase in sales driven by a 24% rise in cloud revenue.
These are the recent developments in Oracle Corporation.
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