Oracle Stock Climbs On Reports Of Deal With Musk's xAI: Is There More Upside Ahead?

Oracle Corp ORCL shares were trading higher following a report indicating Elon Musk‘s artificial intelligence startup, xAI, is nearing a $10 billion deal to rent Oracle’s AI servers.

This potential deal, if finalized, would make xAI one of Oracle’s largest customers, underscoring the significance of the contract for Oracle's cloud infrastructure business.

Oracle Chairman Larry Ellison had previously mentioned their collaboration with xAI, highlighting the increasing demand for computing power from Musk’s company. There are ongoing negotiations, though there is no guarantee that the deal will be signed, reported The Information.

xAI Deal – An Oracle Strategy To Rival AI Capabilities Of OpenAI and Google

Musk’s xAI has been actively seeking funding, recently closing a $6 billion round that values the company at around $18 billion.

This move is part of Musk’s broader strategy to rival the AI capabilities of companies like OpenAI and Google. Oracle’s involvement in these high-stakes discussions reflects its growing role in the AI and cloud computing sectors.

Furthermore, Oracle’s recent update to its database technology aims to enhance its utility in AI applications, reinforcing its commitment to staying at the forefront of technological advancements.

The stock has gained 15.13% in 2024 and is up 24.28% over the past year.

Bullish Momentum Surrounds Oracle Stock

From a technical analysis perspective, Oracle’s stock is demonstrating strong bullish momentum.

Chart: Benzinga Pro

The current share price is $121.10, which is above its 8-day simple moving average (SMA) of $118.16, the 20-day SMA of $116.44, and the 50-day SMA of $120.61. These indicators suggest a continued upward trend.

Additionally, the stock is trading above its 200-day SMA of $113.67, providing a strong bullish signal in the longer term.

Chart: Benzinga Pro

However, some caution is warranted. The Moving Average Convergence Divergence (MACD) indicator is at -0.19, suggesting potential selling pressure. However, it recently crossed over the signal line, which is at -0.89 currently, showing some positive momentum among traders of the stock.

The Relative Strength Index (RSI) is at 59.86, which is approaching the overbought threshold of 70. This could indicate a potential pullback if the RSI continues to rise and enters overbought territory.

The Bollinger Bands analysis is mixed. The stock has recently moved from the lower band to the upper band, driven by the ‘Musk’s xAI surge.’ The surge took the stock beyond the upper limits, indicating possible overvaluation.

Oracle Stock Analysts See An Average 20% Upside

Analysts consensus rates the stock a Buy. Multiple analyst ratings received in March have upgraded their price targets on Oracle stock with their price targets largely between $130 – $145 a share. The price targets imply an average 20% upside from current levels.

Oracle’s stock is currently experiencing bullish momentum, supported by significant corporate developments and positive technical indicators.

However, investors should remain cautious due to potential overbought conditions, which suggest varying degrees of risk and uncertainty. Balancing these factors will be crucial for investors considering Oracle’s stock amid its evolving role in the AI and cloud computing landscape.

ORCL Price Action: Oracle stock was up 0.5% at $121.50 at the time of publication Wednesday.

Now Read: GameStop, AMC Stock In Freefall Wednesday: Is 2024 Meme Stock Rally Over?

Photo: Shutterstock