Oracle's Nvidia‑Backed AI Push Set To Upend The Cloud

In a significant industry shift, Oracle Corporation ORCL is emerging as a formidable player in the AI infrastructure arena, challenging traditional perceptions of its market role. This transformation, highlighted by Scotiabank’s recent endorsement, suggests Oracle’s strategic pivot towards AI and cloud services could redefine its growth trajectory and market valuation.

Scotiabank analyst Patrick Colville initiated coverage of Oracle on Thursday, assigning a Sector Outperform rating and a price forecast of $300.

Colville suggests Oracle is undergoing a major transformation, evolving into a top-tier independent AI infrastructure provider.

While many investors remain cautious about its GPU-as-a-service strategy, Colville writes that Oracle Cloud Infrastructure (OCI) is set to outperform guidance in fiscal 2026, fueled by strong AI demand.

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His analysis downplays concerns about NeoCloud’s margin impact and argues that current Street estimates are reasonable.

Colville sees Oracle as under-owned by long-only funds and believes shares could climb as the company beats expectations.

Based on conversations with Oracle customers and competitors, he highlights OCI’s pricing, performance, and security as key strengths. Oracle’s capital access, NVIDIA Corporation‘s NVDA support, and neutral stance on building foundation models give it a further edge.

He estimates Oracle’s GPU infrastructure revenue will quadruple year over year to $10 billion in fiscal 2026—assuming the Abilene AI data center launches on schedule.

Colville notes the real risk for investors may be missing out, as Oracle continues to execute amid lingering skepticism.

Colville sees Oracle’s new cloud database partnerships with Amazon, Microsoft, and Google as a pivotal step forward, helping to stabilize its declining database market share, which fell to 17% in 2024.

Based on CIO insights, the analyst expects these alliances to curb further losses and drive Oracle’s cloud database revenue to a projected $4.5 billion run rate by fiscal 2027.

While margin concerns persist among investors, Colville argues they’re exaggerated.

Though gross margins may decline with NeoCloud scaling, Oracle’s tight control over operating costs is likely to sustain strong profitability, with estimated non-GAAP operating margins of 42.4% in fiscal 2026—above consensus—and 42% in fiscal 2027.

Initiating coverage with a Sector Outperform rating, the analyst believes Oracle’s valuation premium is warranted as the company undergoes an “AI renaissance,” supported by growth expectations that outpace large-cap software peers.

ORCL Price Action: Oracle shares were up 2.90% at $248.29 at the time of publication Thursday, according to Benzinga Pro.

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