Oracle, the leading provider of cloud-based enterprise software and generative AI services, saw its stock price rise by more than 7% on Monday, after an analyst from Morgan Stanley upgraded the company to a buy rating and raised its price target from $95 to $120.
Morgan Stanley Analyst Praises Oracle’s AI Strategy
In a note to clients, Morgan Stanley analyst Keith Weiss said that Oracle’s AI strategy, which includes its partnership with Cohere, a leading AI platform for enterprise, and its integration of generative AI services into its cloud applications and infrastructure, is a “game changer” that will drive growth and profitability for the company.
Weiss said that Oracle’s generative AI services, which use large language models (LLMs) to automate end-to-end business processes, improve decision-making, and enhance customer experiences, are “unique and differentiated” in the market and will create a “sustainable competitive advantage” for Oracle.
He also said that Oracle’s generative AI services will boost its cloud revenue and margins, as customers will be willing to pay a premium for the value-added features and benefits that generative AI provides. He estimated that Oracle’s generative AI services could generate $10 billion in incremental revenue and $4 billion in incremental operating income by fiscal year 2026.
Oracle Announces New AI Services for Oracle Cloud Infrastructure
Oracle recently announced the availability of Oracle Cloud Infrastructure (OCI) AI services, a collection of services that make it easier for developers to apply AI services to their applications without requiring data science expertise. OCI AI services include:
- AI Vision: A service that enables developers to build applications that can analyze images and videos using computer vision techniques such as object detection, face recognition, and text extraction.
- AI Language: A service that enables developers to build applications that can understand and generate natural language using natural language processing techniques such as sentiment analysis, summarization, and translation.
- AI Data Science: A service that enables data scientists to collaboratively build, train, deploy, and manage machine learning models using their favorite open source frameworks.
- AI Anomaly Detection: A service that enables developers to build applications that can detect anomalies in data streams using machine learning techniques such as time series analysis and outlier detection.
Oracle said that OCI AI services are built on OCI’s best-in-class AI infrastructure, which delivers the highest performance and lowest cost GPU cluster technology in the cloud. OCI AI services also leverage Oracle’s unique Supercluster capabilities, which enable the acceleration of large language model training while reducing the cost.
Oracle Partners with Cohere to Provide Generative AI Services
Oracle also announced its plans to develop powerful generative AI services for organizations worldwide in collaboration with Cohere, a leading AI platform for enterprise. Cohere’s generative AI models use state-of-the-art large language models to create high-quality content such as text, images, audio, and video.
Oracle said that it will provide native generative AI services to help organizations automate end-to-end business processes, improve decision-making, and enhance customer experiences. Oracle will also integrate Cohere’s generative AI models into its cloud applications portfolio, including Oracle Fusion Cloud Applications, Oracle NetSuite, and Oracle industry-specific applications.
Oracle said that it will train, build, and deploy its generative AI models on OCI using Cohere’s platform. OCI is uniquely positioned to run AI workloads as it delivers the highest performance and lowest cost GPU cluster technology in the cloud. OCI also provides very low latency and the highest bandwidth RDMA network in the cloud.
Oracle said that it will offer unrivaled data security and privacy for its generative AI services. Customers will have complete control and ownership of their data. Oracle’s generative AI offerings won’t mix customer data, helping businesses maintain their competitive advantage.
Oracle’s Stock Price Reflects Its Strong AI Position
Oracle’s stock price has been on an upward trend since it announced its partnership with Cohere in June 2021. The company reported strong results for its first quarter of fiscal year 2022, which ended on August 31, 2021. Oracle’s total revenue increased by 4% year-over-year to $9.7 billion. Its cloud services and license support revenue increased by 6% year-over-year to $7.4 billion. Its operating income increased by 7% year-over-year to $3.4 billion. Its earnings per share increased by 11% year-over-year to $1.03.
Oracle’s stock price closed at $103.67 on Monday, up by 7.3% from its previous close of $96.61 on Friday. The company has a market capitalization of $302 billion and a price-to-earnings ratio of 19.5.