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Oracle takes a run at cloud computing’s big three with Trump-backed AI pact

Jan 23, 2025 - financialpost.com
Oracle Corp. has made a significant move in the cloud computing sector by forming a US$100 billion joint venture with SoftBank Group Corp. and OpenAI Inc. to expand its data centers, aiming to compete with industry leaders like Amazon and Microsoft. This initiative, backed by U.S. President Donald Trump, is expected to boost Oracle's cloud business, which currently holds less than a five percent market share in the infrastructure-as-a-service market. Despite Oracle's stock rising over 10 percent in January, analysts remain cautious about the long-term impact and sustainability of this growth, noting that the stock's valuation has surged above its historical average.

The joint venture aims to grow to at least US$500 billion, positioning Oracle closer to the scale of its larger competitors. However, skepticism remains regarding the feasibility and execution of these plans, with figures like Elon Musk and Anthropic PBC's CEO Dario Amodei expressing doubts. While the venture is seen as a positive step for Oracle, analysts advise caution, emphasizing the need for tangible results and clarity on the company's earnings and project impacts. Additionally, speculation surrounds Oracle's potential involvement in a TikTok acquisition, though details and implications remain uncertain.

Key takeaways:

  • Oracle has announced a US$100 billion joint venture with SoftBank and OpenAI to expand its cloud computing business, aiming to compete with Amazon and Microsoft.
  • The venture is expected to significantly boost Oracle's cloud infrastructure sales, potentially increasing from a US$10 billion annual run rate to US$30-40 billion in the coming years.
  • Despite the positive news, there are concerns about the feasibility and impact of the venture, with some analysts urging caution until actual earnings and project details are revealed.
  • Oracle's stock has surged over 10% in January, following a 60% gain last year, but analysts remain cautious about its long-term growth potential and valuation.
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