Oracle Proves the AI Boom Is Real

In our Strategy Portfolio, we are taking a bet that Big Tech and the US are going to continue to perform well. We are buried in FANG, SEMI, U100, and IVV – all US-exposed and all Big Tech-exposed ETF exposures.

We talked the other day about what could possibly go wrong. And what could possibly go wrong is the whole market falls over for some reason. Could be a myriad of reasons, from geopolitical risk to a Trump development.

But the real risk is if there is a hesitation, and the market detects a hesitation in Big Tech commitment to spending on AI and the cloud. That really is the Achilles heel.

If you suddenly found Meta saying they were going to start cutting costs, and, as Microsoft did earlier this year, started cancelling development plans for data centres – if that sort of thing happened, it could undermine the whole Big Tech enthusiasm and undermine our Strategy Portfolio, which is currently sitting at record highs along with the US markets.

So, very interested to see overnight last night – depends when you watch this – Oracle jumped 27% on a set of results. It’s the 15th biggest US stock. It’s obviously a tech stock as well.

Let me just give you some of the things Oracle have told us.

They say bookings – which they call RPO, but it’s bookings from customers – were four times higher than the same period last year. They expect cloud infrastructure revenue to grow 77% this fiscal year, to $18 billion, and reach $144 billion annually by May 2030.

The RPO – the bookings, or “remaining performance obligations” – have jumped 359%. These are their clients giving them orders for the future. They’ve jumped 359% to $455 billion in the first quarter to end August.

They have signed four multibillion-dollar contracts with three customers this quarter: OpenAI, TikTok (ByteDance), and Nvidia. They’ve done the deal with OpenAI for a 4.5GW data centre – which is big.

Cloud infrastructure revenue was up 56%, beating analysts’ forecasts this quarter.

The CEO says: over the next few months, we expect to sign up several additional multibillion-dollar customers, and bookings are likely to exceed half a trillion dollars. The Chairman has said multi-cloud database revenue from Amazon, Google, and Microsoft grew at an incredible rate of 1,529% in the first quarter, and they expect that revenue to grow substantially every quarter for several years as they deliver another 37 data centres to their three hyperscaling partners – for a total of 71 data centres.

So, the message is clear from Oracle – who are buried in the capital expenditure towards the cloud and AI space. It’s going to go on for years. It’s growing very rapidly.

I think if we were to see any sort of loss of confidence in the market or the Big Tech space, we will be buying on weakness. But we’re certainly not going to be doing any selling at this point unless something seismic goes wrong. This seems to be a very solid theme that is going to continue.

It leaves everything that’s happening in no-growth banks or reliable resources in Australia in its wake as a reliable long-term theme. We’re worrying about share prices over the next day, week, month. This horizon is decades.

It’s like being in 1903 and Ford has produced the first Model T off a production line, and we’re wondering whether the automotive stocks have peaked.

So, we’ll keep playing Big Tech.