U.S. Cloud infrastructure provider Oracle is ramping up its generative artificial intelligence (AI) capabilities as competition among cloud providers intensifies, with more companies jumping into AI following the launch of chatbot ChatGPT in November 2022. The surge in demand for computing services and data centers has been driven by large amounts of data required to train AI models, which can be accessed via clouds due to their vast datasets.
Oracle announced additional generative AI features integrated across applications used in finance, supply chain, human resources (HR), sales, marketing, and service this month, enabling tasks such as generating financial reports and drafting job ads that improve productivity while reducing business costs for clients. This comes after the company embedded generative AI capabilities into its technology stack back in January.
Dan Ives of Wedbush Securities believes Oracle is experiencing a renaissance thanks to its AI strategy, noting that it’s “well positioned to be a major beneficiary” due to the data it holds and installed base. JPMorgan analysts also noted that ongoing investments by businesses into AI technologies could drive incremental IT spending and growth across software landscapes, with many technology providers rolling out GenAI capabilities in products or services following enterprise clients’ lead.
Oracle shares have risen 23.74% over the last year as firms capitalized on the generative AI trend, according to FactSet data. The company may see an increase in revenue and a positive impact on its share price if it captures more than expected of spending into AI, JPMorgan analysts added.
Ron Westfall from Futurum Group suggested that while Oracle followed hyperscaler rivals like Amazon, Microsoft, and Google to cloud infrastructure services market shares, the company’s late entry has been offset by increased demand for its AI technology due to the generative AI boom. “Oracle did follow the hyperscalers,” he said on CNBC, adding that it was not a competitive concern in 2024 and beyond as they were at the very beginning stage of this whole new generative AI journey.”
In March, CEO Safra Catz stated that Oracle added several “large new cloud infrastructure” contracts during its fiscal third quarter. Cloud revenue rose by 25% year on year to $5.1bn for the company in Q3. Deutsche Bank analysts noted management commentary suggesting a significant backlog of orders related to OCI, with AI not yet driving meaningful revenues until FY2025, adding that it expects increased sales based upon “anemic penetration” among existing customers and new wins.
Ellison also highlighted plans for Oracle’s Salt Lake City data centre during March; he said the facility could accommodate eight Boeing 747 aircraft if positioned end to end, underlining growth strategies pursued by cloud providers as demand increases due to AI adoption. The company is negotiating sovereign regions with multiple nations while competitors move forward with offerings of GenAI solutions within specific countries at their client’s request for data security reasons.
Oracle has also announced a partnership between itself and Nvidia, which will see the pair deliver sovereign artificial intelligence products around the globe that leverage chips by tech group Advanced Micro Devices (AMD). The company is investing more than $8bn in Japan over ten years to develop cloud computing and AI infrastructure.
Leave a Reply