Oracle Corporation (NYSE:ORCL) shares rose on Tuesday after UBS analysts upgraded their rating on the stock to 'Buy', citing the software company’s “underappreciated edge” with its GPU capacity.
Analysts wrote that they were “increasingly confident” about its GPU capacity as well as its OCI architecture, which will be enough to attract new customers and drive OCI usage, according to UBS.
“Even with the stock already +42% YTD, we believe GPU supply constraints could be enough to drive outsized performance in Oracle shares and highlight our deep-dive into the GPU supply constraints faced by Microsoft and other cloud infrastructure providers,” analysts wrote.
Shares of Oracle were up around 2% in early trading Tuesday at US$119.13.
While Oracle’s stock has been on a run in 2023, UBS is still bullish on the company’s AI efforts.
Analysts believe that Oracle is benefiting from “outsized allocations” of Nvidia GPUs relative to its size.
“We could be sitting in front of 6-12 months of GPU shortage noise and we haven’t even seen the $2b in AI start-up commitments convert to OCI usage,” UBS wrote.
“While we’ve been skeptics about the existence and certainly sustainability of any network-based OCI architectural advantage over the Big 3, our checks suggest that Oracle (as well as CoreWeave and Lambda) could have a GPU speed-to-deployment edge.”
What’s more, analysts believe that Oracle’s guidance of around 50% IaaS growth full year 2024 is conservative.
“The larger SaaS segment is stable and we think the core database business could get a lift from a pick-up in cloud migration activity and/or prove to be a quiet AI beneficiary.”