This top artificial intelligence (AI) stock is rising and may rise

Nvidia was a benchmark in the artificial intelligence (AI) space due to its graphics processing units (GPUs) that played a crucial role in training and implementing AI models. But the stock has fallen out of favor lately, with investors worried about its slowing growth.

This is evident from the fact that the stock has fallen 5% since the release of its fiscal 2Q25 results on August 28. The chipmaker’s quarterly revenue rose 122% year-over-year to $30 billion last quarter as it continued to dominate the AI ​​chip market while its extraordinary pricing power led to growth of 152% year-over-year in adjusted earnings to $0.68 per share.

However, management’s forecast that its revenue will grow at a relatively slower pace of 80% year-on-year in the current quarter appears to have encouraged investors. There’s no doubt that Nvidia is still on track to grow at a very healthy pace and continues as the undisputed leader in the AI ​​chip market, but the company’s expensive valuation seems to count against it.

Meanwhile, another AI company that recently released its results saw its share price increase, despite growing much more slowly than Nvidia. Here’s a closer look at this name and why it looks like a solid AI stock right now.

AI is helping Oracle build a great revenue pipeline

Oracle (NYSE: ORCL) came into the spotlight this year as AI drives a marked acceleration in the company’s cloud business. That’s why shares of the company, which was traditionally known for its database software, surged more than 11 percent after releasing its fiscal first quarter 2025 results (for the period ended Aug. 31) on Sept. 9. .

Total revenue rose 8% year-over-year to $13.3 billion in constant currency terms, beating the consensus estimate of $13.2 billion. Adjusted earnings rose at a faster pace of 17% year-over-year to $1.39 per share, which was again higher than Wall Street’s estimate of $1.33.

However, all eyes turned to Oracle’s remaining performance obligations (RPO), a measure of the total value of a company’s contracts that will be fulfilled at a future date. The company’s RPO rose 53% from the same quarter last year to a record $99 billion, suggesting it’s building an impressive revenue pipeline that should supercharge its long-term growth.

More specifically, Oracle’s global cloud revenue rose 22% year-over-year during the quarter to $5.6 billion, while cloud infrastructure revenue rose 46% to $2.2 billion. Management said 42 additional cloud GPU contracts were signed for a total of $3 billion in the previous quarter.

The story continues

Moreover, demand for Oracle’s cloud infrastructure is outstripping supply, which is why the company plans to continue investing in capacity to serve the burgeoning end market. As a result, it said its capital spending in fiscal 2025 will be double last year’s level. It might seem like an ambitious move, but the demand for cloud infrastructure for training and deploying AI models is growing rapidly.

Customers are leasing Oracle infrastructure to scale AI development, and this trend is likely for a long time to come as Goldman Sachs estimates that demand for cloud services could grow at an annual rate of 22% through 2030, generating $1 trillion in annual revenue. The investment bank points out that generative AI could account for $200 billion to $300 billion of that spending based on investments by companies looking to create AI applications.

Specifically, the infrastructure-as-a-service (IaaS) market — which was Oracle’s fastest-growing segment last quarter — could generate $580 billion in revenue by 2030. Therefore, the company s -may find out at the start of an extraordinary growth opportunity. as its IaaS revenue was $2.2 billion in the first fiscal quarter, which equates to an annualized revenue rate of $8.8 billion this fiscal year.

Stronger growth could push the stock higher

Management says its strong contract volume will drive revenue growth through fiscal 2025. So the company expects its fiscal second-quarter sales to grow between 8% and 10% in constant currency terms, which would be a slight improvement over the previous quarter.

More importantly, the company is confident that its fiscal 2025 top line is on track to grow by double digits, with full-year total cloud infrastructure revenue growing faster than last year.

And analysts expect this double-digit growth to continue in the next two fiscal years.

But investors have already seen how big the cloud computing market is expected to become thanks to the adoption of AI. So don’t be surprised to see Oracle’s growth improve in the coming years, and the market could reward that with more upside.

That’s why it might be a good idea for investors to buy Oracle while it trades at an attractive forward earnings of 25 times, a discount to Nasdaq-100 index earnings multiple of 31 (using the index as a proxy for technology stocks). This AI stock could fly higher on the back of its 54% gain so far this year.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, Nvidia and Oracle. The Motley Fool has a disclosure policy.

Forget Nvidia: This Top Artificial Intelligence (AI) Stock Is Soaring and May Go Higher was originally published by The Motley Fool