Oracle surges on AI cloud growth as customers race to secure computing capacity

By Akash Sriram and Akriti Shah

Sept 10 (Reuters) - Oracle ORCL.N shares soared about 35% on Wednesday after the company pointed to a demand surge for its cloud services from AI firms, underscoring its deeper push into the backbone of artificial intelligence systems.

The surge in Oracle's cloud business reflects a broader shift in the industry, with companies such as OpenAI and xAI scrambling to secure massive computing capacity needed to stay ahead in the AI race by boosting spending to hundreds of billions of dollars annually.

The stock was up 34.7%, hitting a record high of $325.90 in early trading, set for its biggest one-day jump since 1992.

The company will add about $237 billion to its market valuation, taking the total valuation to around $915 billion, if gains hold, and bringing Oracle closer to the coveted $1 trillion-dollar club.

Its shares have risen 45% so far this year, outperforming stocks in the so-called Magnificent Seven and the broader S&P 500 index .SPX, with investors betting big on AI-driven cloud firms.

Oracle's results lifted shares of Nvidia NVDA.O, Broadcom AVGO.O and Advanced Micro Devices AMD.O, which supply semiconductors used in data centers. Shares of the companies rose between 2.8% and 4.6% in early trading.

Competitor CoreWeave's CRWV.O shares were up 17%.

Oracle reported four multi-billion-dollar contracts with three clients during the August quarter, highlighting a robust appetite for its cloud services.

"Over the next few months, we expect to sign up several additional multi-billion-dollar customers and RPO is likely to exceed half-a-trillion dollars," said CEO Safra Catz.

Still, Microsoft MSFT.O, Amazon Web Services AMZN.O and Google Cloud GOOGL.O dominate the cloud computing market with a combined 65% share, while Oracle, Alibaba, CoreWeave and others hold a smaller slice of the market.

The company has struck deals with Amazon, Alphabet and Microsoft let their cloud customers run Oracle Cloud Infrastructure (OCI) alongside native services. The revenue from these partnerships rose more than sixteen-fold in the first quarter.

"What matters here is that this figure now includes contributions from the Stargate venture and two other big AI players, meaning revenues beyond 2026 go much higher," said Ben Reitzes, analyst at Melius Research.

Analysts also flagged Oracle's role in SoftBank and OpenAI's Stargate project as another tailwind, giving the company a foothold in the large-scale AI infrastructure project that is expected to channel about $500 billion in spending.

Oracle also supplies cloud services to xAI, the AI startup founded by Elon Musk, the world's richest person and a longtime ally of the cloud computing company's chairman Larry Ellison.

Ellison, 81, whose net worth is largely built on his 41% stake in Oracle, is fast approaching Musk in the race for the world's richest title, according to Forbes data.

Oracle's stock is trading at over 33.34 times its 12-month forward earnings estimates, compared with Amazon's 32.34 and Microsoft's 30.83.