The US economy has a long history of producing the world’s most valuable companies. United States Steel It became the first ever billion-dollar company in 1901, and 117 years later, apple Became the world’s first company to exceed a trillion dollar value.
Apple is now worth over $3 trillion, but since 2018, tech giants have become Nvidia, Microsoft, Amazon, Meta platformsand alphabet Other countries have joined the trillion dollar club. But I believe another country is on its way.
Oracle (NYSE: ORCL) Founded in 1977, Microsoft has been involved in nearly every technological revolution since then. Today, the company is a leader in AI-powered data center infrastructure, which could be the company’s ticket to a trillion-dollar valuation.
Based on Oracle’s current market cap of $429 billion, investors who buy its shares today could see a 133% gain if it gets there.
Pioneering AI Infrastructure
Large Language Models (LLMs) Algorithms are the foundation of every AI software application. They are trained by ingesting massive amounts of data, and from there, the model identifies patterns and learns how to make predictions. Typically, “intelligence” is trained on algorithms that manipulate data. artificial intelligence Applications are powered by GPUs that hold most of the data, and training is facilitated by centralized data centers filled with GPUs.
Nvidia provides the world’s most powerful GPUs for developing AI models. Simply put, the more GPUs a developer has access to, the more data they can feed into an LLM, and the faster it can process it. Oracle Cloud Infrastructure (OCI) Supercluster technology allows developers to scale to more than 32,000 Nvidia GPUs (soon to exceed 65,000), more than any other data center provider.
Additionally, the company’s Random Direct Memory Access (RDMA) technology moves data from one point to another faster than traditional Ethernet networks. And since developers often pay for computing capacity by the minute, OCI is among the fastest and cheapest solutions for training LLM holders. That’s why AI leaders like OpenAI, Cohere, and Elon Musk’s xAI now use Oracle.
Oracle CEO Larry Ellison says the company currently has 85 live data centers, with 77 under construction. However, he estimates the company will eventually have between 1,000 and 2,000, so it’s only scratching the surface of the opportunity so far.
Automation is one of the things that sets Oracle apart from other data center operators. Regardless of size, every Oracle data center is functionally identical, so the company is able to manage them all using software alone — without the need for humans. Not only does this save significant costs for the end user, it also creates a more secure service by eliminating human error. Additionally, automation is key to scaling Oracle data center locations into the thousands.
Oracle Data Center Revenue Soars
Oracle generated $13.3 billion in total revenue during the first quarter of fiscal 2025 (ended August 31), up 7% from the same period last year. Specifically, the OCI segment generated $2.2 billion in revenue, up a whopping 46%.
As in previous quarters, OCI’s revenue could have grown faster in the first quarter if the company had more data centers online. It currently has a huge backlog of customers waiting for more computing capacity.
This is reflected in Oracle’s remaining performance obligations, which reached a record $99 billion during the quarter, up 52% year-over-year. This was an acceleration from the 44% growth the company achieved in the fourth quarter of fiscal 2024. Oracle signed 42 new GPU capacity deals worth $3 billion during the first quarter alone, contributing to the sharp increase in remaining performance obligations (RPOs).
CEO Safra Catz believes that 38% of the company’s buybacks (about $37.6 billion) will convert to revenue over the next 12 months, which should help the company return to double-digit top-line growth. Additionally, she expects OCI’s growth to accelerate from the prior fiscal year.
Oracle’s (Mathematical) Path to the Trillion Dollar Club
Oracle has earned $3.88 in earnings per share in the last 12 months. So, based on its current stock price of $155.89, it is trading at a P/E ratio of 40.2. Nasdaq 100 The technology index is trading at a price-to-earnings ratio of 30.7, so Oracle stock is certainly not cheap when compared to its peers.
However, Oracle’s earnings have grown 15% over the past 12 months compared to the prior period, and Wall Street is expecting earnings to grow at an accelerated rate of 24% for fiscal 2025 overall. That may explain why investors are now willing to pay a premium for its shares.
Mathematically, if Oracle’s P/E ratio holds steady, the company could achieve a $1 trillion valuation within the next 10 years, even if its earnings growth slows to just 8.8%. But that’s a very conservative estimate given Ellison’s comments, which could see it scale its data center tenfold In the long run. If that happens, Oracle’s earnings growth is likely to accelerate, not slow, over the next decade.
Remember that the company’s data centers are automated, so they offer incredible scalability. In other words, Oracle is expected to see its gross profit margin increase as it builds more data centers, which will be a huge boost to its earnings.
As a result, I believe Oracle has a great opportunity to join its fellow tech companies in the trillion-dollar club within the next decade.
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Unstoppable Stock Could Join Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta in Trillion Dollar Club Originally posted by The Motley Fool