News

Over the last two years, artificial intelligence (AI) has been the hottest topic on Wall Street. Stocks like Nvidia have skyrocketed tenfold as individuals and organizations have embraced AI-powered tools at a breakneck pace. Yet Nvidia has made countless headlines, and other AI stocks have flown under the radar.

So, let's examine one such stock that made its name in the 1990s but is once again flying high thanks to its AI potential, which could significantly impact its market valuation by 2030: Oracle (NYSE: ORCL).

What does Oracle have to do with AI?

First, let's examine why the AI revolution is breathing new life into Oracle.

In a nutshell, Wall Street is excited about Oracle's popular database software and numerous data centers. Both of these are in high demand from big-name clients, such as OpenAI, Alphabet, and Microsoft.

That's because demand for AI-powered tools is through the roof. As it stands, only so many companies can provide the enormous computing power required to run these complex applications, and Oracle is one of them.

In fact, Larry Ellison, board chair and chief technology officer of Oracle, recently told CNBC that the company was constructing some of the largest data centers on Earth:

Some [data centers] are getting close to, dare I say it, a gigawatt [in power usage], which is [equivalent to] a pretty good-sized city or one enormous AI cloud training data center.

In other words, training AI models requires immense physical computing resources, which Oracle is one of the few companies capable of supplying.

Will Oracle ride the AI wave to a market cap of $1 trillion?

Now that we understand why Oracle is benefiting from the AI revolution, it's time to ask whether the company can parlay this situation into a market valuation above $1 trillion.

For those who may not be aware, Oracle is already a significant player in the market. As of now, its market cap stands at a substantial $400 billion, making it the 17th-largest American company, nestled between Mastercard ($417 billion) and Procter & Gamble ($393 billion).

Oracle's market cap has seen a remarkable surge over the past two years, climbing from a low of $165 billion to its current valuation of $400 billion, which is also an all-time high. This is a significant leap for a company whose market cap had previously peaked at $259 billion 24 years ago.

With the AI wave on the horizon, Oracle is poised for even greater growth. Analysts anticipate a 9% increase in sales this year, with a further 11% growth expected next year.

However, for the company to hit a valuation of $1 trillion by 2030, Oracle's stock would need to grow at a compound annual growth rate (CAGR) of 18.1%. Over the last five years, Oracle's market cap has grown by 15%. If its current growth trend holds, Oracle will surpass the $1 trillion mark sometime in 2031.

At any rate, Oracle is enjoying a renaissance. Tech behemoths like Microsoft, Alphabet, and Amazon are investing tens of billions of dollars into AI projects, and some are partnering with Oracle because of its data center expertise.

Whether Oracle reaches a $1 trillion valuation is somewhat beside the point for investors. The company is benefiting from the AI revolution, and investors seeking exposure to the sector may want to give this under-the-radar AI stock a closer look.

Should you invest $1,000 in Oracle right now?

Before you buy stock in Oracle, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Oracle wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $791,929!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of July 8, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet, Amazon, Nvidia, and Procter & Gamble. The Motley Fool has positions in and recommends Alphabet, Amazon, Mastercard, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.