For much of the last two years, a small concentration of mega-cap artificial intelligence (AI) stocks have played a major role in sending the stock market to new highs. Among the biggest winners were Nvidia, Amazon, Alphabet, Microsoft, and Meta Platforms.
Nvidia's graphics processing units (GPUs) are considered the industry gold standard for generative AI hardware, and cloud hyperscalers and others in big tech just couldn't stop buying these pricey chipsets. While GPUs are still very much in demand, I think a new chapter is quietly unfolding within the broader AI storyline.
Let's explore why the AI opportunity is more than just chips. From there, I'll go into detail about why I see Oracle (ORCL -2.14%) as a breakout candidate to lead the next bull market.
It's not just about chips anymore
When the AI revolution kicked off about two-and-a-half years ago, Nvidia was the default option when it came to purchasing GPUs. But over the last couple of years, competition has started to creep into the semiconductor market.
Advanced Micro Devices is Nvidia's most direct rival in the AI data center market. However, all the cloud hyperscalers that I referenced above are also investing heavily into custom silicon in an effort to migrate from an AI architecture that's entirely built on Nvidia's backbone.
In my view, GPUs aren't becoming less important by any means. However, with the introduction of so many new chips, I do think the semiconductor landscape is becoming commoditized. At this point, AI developers know that they need to keep buying chips. I think the bigger use case for these companies is becoming rooted in figuring out how to manage these GPU clusters amid ongoing AI infrastructure buildouts.
This is where Oracle identified an opportunity early on, and the company's results are starting to show a clear pattern.
Image source: Getty Images.
Oracle is building a transformative infrastructure services platform
On June 11, Oracle reported earnings results for its fiscal fourth quarter and full 2025 year (ended May 31). For the year, Oracle generated $57.4 billion in revenue -- an increase of 8% year over year. I understand that this growth rate pales in comparison to Nvidia and its "Magnificent Seven" peers.
So, why am I so optimistic about Oracle? The answer lies deeper in the company's financial profile. Oracle's fastest-growing business is its infrastructure-as-a-service (IaaS), which essentially provides a cloud-based network to access high-performance GPU architectures inside data centers.
This is a unique and savvy opportunity for Oracle, as it provides customers with an efficient and capex-light model to access GPUs for compute without having to invest time and money into constructing their own AI data center. During fiscal 2025, Oracle generated $10.3 billion from its IaaS segment, which represented growth of 49% year over year.
While this level of growth is impressive, Oracle's management is guiding for even further momentum. During the earnings call, Oracle CEO Safra Catz said that cloud infrastructure growth should eclipse 70% during fiscal 2026, thanks to strong remaining performance obligations (RPO), which are expected to soar by more than 100%.
Is Oracle stock a buy right now?
Following the fourth-quarter earnings report, shares of Oracle popped and reached new all-time highs. Normally, I don't encourage investing in a stock when there is so much momentum fueling the share price.
But as Catz told investors during the earnings call, "Oracle is well on its way to being not only the world's largest cloud application company -- but also one of the world's largest cloud infrastructure companies." To me, Oracle had the foresight that access to compute was going to be a problem as chip manufacturers worked tirelessly to fulfill supply constraints for GPUs.
Given the strong outlook from Oracle's management, combined with infrastructure services becoming an increasingly important application in the broader AI market, I think Oracle is well-positioned for significant growth.
For these reasons, I see Oracle as a no-brainer right now, and think investors looking to capitalize on infrastructure as the next big growth trend in the AI realm should consider a position in the stock.
