The whole market is talking about Nvidia’s blowout earnings report.
170% increase in revenue, a 422% increase in net income, gross margins jumping from 46% to 71% – it was a testament to just how significant the AI wave is…
Especially because Nvidia is also expecting another (annual) 170% increase in its third-quarter revenue.
Nvidia’s earnings report was so powerful, it lifted the entire market – with all indexes closing in the green yesterday.
That’s incredible.
But the funny thing is, Nvidia is not actually an AI stock per se. It’s a chipmaker that sells to companies that run AI applications.
That’s why for today’s stock pick, we’re going to highlight another big company that’s also not an AI stock – but is most definitely benefitting from the AI boom.
It’s not a FAANG company – but it’s also not a risky penny stock that could see half its value wiped out in a few weeks.
If you missed out on Nvidia – or are just looking for a bigger, safer stock that could also surge thanks to AI – make sure you don’t miss this one.
Oh, and did I mention that Nvidia is one of this company’s clients?
Oracle Corporation (ORCL)
Having been around since 1977, Oracle is a name that would be recognizable to most. And while this software company has steadily grown over the decades to an impressive market capitalization of over $300 billion, there could still be much further growth ahead (just look at what happened to Nvidia, which was also already a large company before its outperformance this year).
Now, Oracle may be best known for its enterprise resource planning (ERP) software. But the main beneficiary of the generative AI boom is its cloud infrastructure segment. Oracle provides both on-site and cloud data center infrastructure, which is where all the GPUs running the generative AI algorithms must sit.
Oracle is recognized as a market leader in this field, with Nvidia being one of Oracle’s clients, thanks to Oracle being able to fit up to 32,000 GPUs in a single cluster.
For the fourth quarter ending May 31, 2023, Oracle saw its cloud infrastructure revenue grow by 76% on a year-on-year basis – far above the company’s overall revenue growth.
But as Nvidia’s latest results show, this could just be the start. And that could be a strong catalyst for Oracle, whose stock has not only returned 40% this year – but has actually already surpassed its 2021 highs.
On top of that, while its trading at a current P/E ratio of 38x, its forward P/E ratio is only 21x – a substantial divergence that could bode very well for this stock.
To your wealth,
Felix @ Ace of Investing
