By Dan Gallagher

Project Stargate is good news for several major tech companies. The timing is particularly good for Oracle.

The ambitious AI infrastructure venture unveiled at the White House named Oracle, with OpenAI and Softbank, as a key partner and equity investor. Oracle's share price jumped Wednesday morning, following a 7% gain Tuesday as reports of the project came out ahead of the closing bell.

The news also sparked strong gains for chipmakers Nvidia and Arm, along with Microsoft. All three were named as "initial technology partners" for the project, along with Oracle. But Oracle's stock has been in a bit of a lurch since the company's earnings last month included a disappointing revenue forecast and a huge jump in projected capital spending. The shares had sunk 15% subsequently.

The latest gains put Oracle's stock price back near its all-time high. The stock's valuation is above 28 times projected earnings, which is the highest multiple Oracle has fetched in more than two decades, according to FactSet data.

Investors don't seem worried. Several analysts said Wednesday that the Stargate project solidifies Oracle's position in the AI race.

"With AI capacity only really just starting to hit in FY25, there is a long runway to convert AI bookings into accelerating [Oracle cloud] growth," said Brad Zelnick of Deutsche Bank.

Karl Keirstead of UBS said, "The scale of this data center build-out is likely even larger than most Oracle analysts contemplated." Oracle's high-priced AI dreams aren't yet giving Wall Street nightmares.

This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.

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(END) Dow Jones Newswires

January 22, 2025 11:49 ET (16:49 GMT)

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