Oracle Corp’s (NYSE:ORCL) latest earnings results may signal a broader trend for ETF investors: demand for artificial intelligence (AI) infrastructure is far from slowing.
The company’s remaining performance obligations totaled about $553 billion, indicating strong demand for AI-related infrastructure being built behind the scenes.
Shares of Oracle opened around 14% higher on Wednesday after the company reported third-quarter results that topped analysts’ estimates, with a significant increase in cloud infrastructure sales and a massive backlog of future contracts.
After Wall Street panicked over the company’s huge infrastructure costs, shares closed 1.5% lower on Tuesday before the earnings results were out. However, the earnings revealed that a shift to customer-funded data centers has offset its “$50B+ AI capex” burden, supporting a 20% revenue growth and sharply higher contracted revenues.
AI Infrastructure Demand Still Running Hot
Oracle’s cloud infrastructure revenue rose 84% year over year, reflecting strong demand for data center capacity needed to support AI workloads.
According to Jake Behan, Head of Capital Markets at Direxion, the results reinforce a key market narrative.
“Oracle’s results reinforce the idea that AI demand is still running ahead of available infrastructure. Cloud infrastructure revenue up +84% shows the appetite for compute capacity remains extremely strong.”
Oracle’s massive backlog also counters a key concern that demand for AI infrastructure is lumpy, Behan believes.
“The massive backlog of orders helps dispel the notion that infrastructure revenue could prove lumpy or cyclical. A years-long list of remaining performance obligations positions Oracle as a key beneficiary of structural compute demand,” he noted.
Why ETF Investors Are Watching
Oracle’s momentum could spill over to other tech- and semiconductor-based ETFs focused on the AI space.
For example, funds such as State Street Technology Select Sector SPDR ETF (NYSE:XLK) and Vanguard Information Technology Index Fund ETF (NYSE:VGT) hold substantial positions in large-cap tech names, fueling the AI revolution.
Semiconductor-based funds such as VanEck Semiconductor ETF (NASDAQ:SMH) and iShares Semiconductor ETF (NASDAQ:SOXX) may also be beneficiaries as expanding data center infrastructure drives demand for advanced chips.
“Oracle has quietly become one of the larger buyers of AI chips as it scales its AI footprint,” Behan said.
The Risks Behind Oracle’s AI Bet
Despite the positive demand outlook, Oracle’s build-out of AI infrastructure comes with risks.
“Oracle’s comparatively smaller cloud base makes its bet on AI infrastructure proportionally larger and, proportionally riskier,” Behan said.
Execution may be critical to Oracle’s AI play as it races to build out its infrastructure capacity.
For traders looking to position around volatility, leveraged products such as the Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) and Direxion Daily Semiconductor Bear 3X Shares (NYSE:SOXS) allow tactical trades tied to semiconductor stocks, while Direxion Daily ORCL Bull 2X Shares (NASDAQ:ORCU) and Direxion Daily ORCL Bear 1X Shares (NASDAQ:ORCS) provide short-term vehicles targeting volatility in Oracle shares.
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