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

Compared to the big three of Amazon, Microsoft and Alphabet Inc., Oracle is a small player in cloud computing

Oracle Corp. has charged out of the gate in 2025, after its best year in a quarter-century. A plan unveiled with President Donald Trump has intensified hopes that its cloud business will see a tailwind from artificial intelligence.

The stock’s latest advance came on news the software company is forming a $100 billion joint venture with SoftBank Group Corp. and OpenAI to fund an expansion of data centers to support a business in which Oracle lags behind rivals like Amazon.com Inc. and Microsoft Corp.

“This certainly has us looking at the name in a way we hadn’t before, since this could represent a meaningful inflection in growth,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder. “It seems like it is in good company here, but my main hesitation is about how long this halo might last, since the stock has really rocketed.”

Oracle shares have performed like some of the tech giants that have driven the market’s gains for the past two years, as it seeks to establish itself as a major player in cloud computing. The stock is up more than 10% in January after posting a nearly 60% gain last year, its best performance since 1999.

The joint venture has a goal of growing to “at least” $500 billion, which would be considerable in comparison to the tens of billions of dollars that megacaps have poured into AI. UBS expects the combined capex of major tech companies will come in at $280 billion in 2025.

However, there are questions about the scope of new commitments and whether the news represents a dramatic increase from previously announced plans. Elon Musk publicly questioned whether the companies could follow through on their promises, while Anthropic’s CEO also queried the financing and said the project seemed “a bit chaotic.”

In a sign of the headline whiplash that has accompanied his return to the presidency, Trump also said he would be open to Oracle Chairman Larry Ellison buying TikTok as part of a joint venture with the US government, a prospect that is difficult to measure in terms of its likelihood or impact.

“This is all very speculative, and potentially meaningful, but it sounds crazy to me in a lot of ways,” Ghriskey said. “It is good to be on Trump’s good side, but that can be a short-term thing.”

A Small, Growing Player

Compared to the big three of Amazon, Microsoft and Alphabet Inc., Oracle is a small player in cloud computing. It has a less than 5% share in the infrastructure-as-a-service market, compared with Amazon Web Services at more than 40% and Microsoft around 16%, according to Bloomberg Intelligence — which also estimated the venture could help grow its cloud infrastructure sales from a roughly $10 billion annual run rate currently to $30 billion or $40 billion over the coming years.

“This moves Oracle even closer to the ballpark that Amazon, Microsoft and Alphabet are mentioned in,” said Jim Awad, senior managing director at Clearstead Advisors, referring to the venture. “While there’s probably some hype around Trump’s announcement, this is still a clear positive. It is in such a powerful long-term uptrend that you need to stay involved, even if valuations aren’t exactly cheap anymore.”

While Oracle’s most recent results failed to live up to high expectations, Wall Street has steadily grown more positive on its prospects, and growth in Oracle’s cloud infrastructure business is expected to far outpace its overall revenue growth this year, according to Bloomberg Consensus estimates.

Still, the stock’s rally on the venture news hasn’t been met with a commensurate increase in the analyst consensus. Expectations for the company’s net 2025 and 2026 earnings are up just 0.2% over the past week, while the view for revenue is unchanged.

The stock’s forward earnings multiple has swelled above 27, well above its 10-year average of 15.8. It also trades at a premium to the Nasdaq 100 Index, though it is below Microsoft’s multiple of 31.

Joe Tigay, portfolio manager of the Rational Equity Armor Fund, is among those taking a cautious eye toward the stock’s rally.

“It’s prudent to wait and see what the actual earnings are and what the actual company says about all these projects, rather than just pricing it in right now because the timing is often uncertain and how big of an impact is always uncertain.”

He added that it was impossible to assess the the prospect of a deal surrounding TikTok without further details.

“In terms of value for Oracle, it’s really hard for me to say that would be great for the bottom line or terrible.”