This article first appeared on GuruFocus.
Oracle (NYSE:ORCL) is in the middle of a once-unthinkable transformationand the numbers behind it are staggering. Long-time cloud skeptic Larry Ellison has flipped the script, with Oracle now pouring tens of billions into AI-focused infrastructure. After years of trailing the Big Three, the company is catching up fast thanks to monster deals with TikTok, Nvidia (NASDAQ:NVDA), and OpenAI. The OpenAI pact alone could be the biggest cloud contract ever, anchored by a five-gigawatt Stargate data center project that’s backed by the White House and already under accelerated buildout. Oracle’s plan includes powering a 1.4-gigawatt facility in Texas entirely with gas generatorsburning more than $1 billion annually just to keep it running.
This full-tilt expansion, while bold, hasn’t come without a cost. Oracle just posted negative annual cash flow for the first time since 1990, sparking debate about how sustainable the AI infrastructure gold rush really is. But bulls argue this is Oracle’s Nadella momenta high-burn pivot that could yield steep returns once the spend stabilizes. Analyst Mark Moerdler says margins are likely to rebound, and cash flow could turn substantial as the cloud business scales. Clay Magouyrk, the former AWS engineer now leading Oracle Cloud Infrastructure, has quickly become a rising force inside the company. With over 600 Amazon alumni joining his team and 23,000 employees reporting to him, Magouyrk is now a name investors are watching closely.
The payoff? AI workloads are now driving the majority of Oracle’s cloud backlog, with training and inference demand surging across sectors. TikTok was the turning pointat one point outspending the entire rest of OCI combinedand OpenAI is set to top that. Nvidia’s also in deep, tapping Oracle for GPU clusters in Japan and Indonesia. Even Meta (NASDAQ:META) and Elon Musk’s xAI are reportedly in talks. While Oracle’s cloud arm still lags far behind AWS, Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOG) in raw market share, its early bet on bare metal servers and aggressive pricing could carve out a profitable niche in AI infrastructure. The runway looks long, but if Oracle sticks the landing, this may be the company’s most dramatic reinvention yet.