Oracle: A Potential New Member of the $1 Trillion Club

The U.S. economy has consistently produced some of the world’s most valuable companies. Over the years, numerous firms have reached substantial market capitalizations, showcasing the remarkable growth of the American tech landscape.

• United States Steel was the first company to achieve a valuation of $1 billion in 1901.
• General Motors became the first company to reach a market cap of $10 billion in 1955, riding the wave of the automotive boom.
• General Electric, known for manufacturing various products, from refrigerators to airplane engines, became the world’s first $100 billion company in 1995.
• Apple made headlines in 2018 when it became the first company to cross the $1 trillion mark, mainly driven by the success of iconic products like the iPhone.

As of today, Apple remains the largest company globally, boasting a market capitalization of $3.7 trillion. Since 2018, seven other American tech giants have also achieved membership in the trillion-dollar club, including Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, Tesla, and Broadcom.

However, one more company appears poised to join this elite group in the next four years: Oracle (ORCL). The company's industry-leading data center infrastructure is increasingly sought after by some of the biggest developers in the artificial intelligence (AI) space, with management suggesting that this segment could grow more than tenfold in the coming years.

As of this writing, Oracle's market cap stands at $463 billion. If it does successfully enter the $1 trillion club within four years, investors who purchase its stock now could see returns of approximately 116%.

High Demand for Oracle's Data Centers

According to Jensen Huang, CEO of Nvidia, data center operators—including Oracle—are expected to spend around $1 trillion over the next four years to upgrade their infrastructures to meet the rising demand from AI developers. This investment will primarily focus on equipping facilities with thousands of graphics processing units (GPUs), which are essential for handling large datasets involved in AI workloads.

Oracle's Cloud Infrastructure (OCI) features technology that allows developers to scale up to 65,000 of Nvidia's H200 GPUs—the highest capacity available in the industry. With greater access to GPUs, developers can create and implement larger models, leading to advancements in AI software.

Moreover, OCI employs random direct memory access (RDMA) technology enabling faster data transfer compared to traditional Ethernet networks. Given the minute-based rental model for computing capacity, enhanced processing speeds can yield significant cost savings for developers.

In Oracle's recent fiscal report for the second quarter of 2025, GPU usage surged by 336% compared to the same period a year prior, reflecting the rapid increase in demand. OCI has successfully attracted top AI startups, including Cohere, OpenAI, and Elon Musk's xAI.

Oracle currently operates 98 data center regions, but it plans to expand this network tenfold to somewhere between 1,000 and 2,000 locations over time. Additionally, OCI will soon introduce clusters featuring over 131,000 of Nvidia's latest Blackwell GPUs, paving the way for the next wave of advanced AI applications and potentially generating even more demand.

OCI: The Fastest Growing Segment of Oracle

In the second quarter, Oracle reported total revenues of $14.1 billion; however, OCI only accounted for $2.4 billion of this total, indicating room for growth. In comparison, Oracle’s software-as-a-service (SaaS) business generated $3.5 billion during the same quarter.

Despite being smaller than SaaS revenue, OCI stands out due to its growth potential. While SaaS revenue grew by 10% year-over-year, OCI revenue soared by 52%, marking its fastest growth in a year and showing signs of acceleration.

Potential for even faster growth exists for OCI, but increased demand is pressuring Oracle’s capacity to meet it. This surge is evident, as the company's remaining performance obligations (RPOs) rose by 50% to $97 billion in the second quarter. RPOs typically convert into future revenue when Oracle can fulfill the agreed services—indicating a possible surge in OCI revenue once the company can expand its data center capabilities based on locked-in deals.

CEO Safra Catz anticipates that RPOs will continue to grow due to a robust pipeline of new deals, including a significant agreement with Meta Platforms. Meta's widely popular large language model (LLM), Llama, has been downloaded over 600 million times, and the company plans to transition some of its training workloads to Oracle's infrastructure.

Pathway to Joining the $1 Trillion Club

Currently, Oracle stock trades at a price-to-earnings ratio (P/E) of 40.5, slightly above the average P/E of other major players like Microsoft, Amazon, and Alphabet (which sits at 36.7). However, when assessing Oracle’s value based on future earnings potential, its attractiveness increases. Wall Street estimates the company's earnings per share (EPS) will grow by 14.4% to $7.05 in fiscal year 2026, placing its stock at a forward P/E of just 23.5.

To maintain its current P/E of 40.5, Oracle's stock would need to rise by 72.3% in the next 18 months, pushing its valuation close to $800 billion. If the company achieves a similar 14.4% EPS growth in the following fiscal years, it could reach $1.04 trillion in market value. Even if the P/E settles at 36.7, Oracle could still be valued around $950 billion.

Importantly, Oracle's actual earnings have grown by 22% in the first half of fiscal 2025, suggesting Wall Street’s growth estimates might be conservative. The company aims to massively expand its data center footprint, creating a unique and automated infrastructure that should enhance profitability as it scales.

During recent investor calls, Catz discussed the rising gross profit margins of its infrastructure business as more data centers come online. If Oracle’s earnings continue to grow at a rate of 22% annually instead of 14% through fiscal 2028, it is highly likely to secure its place in the $1 trillion club, even if the P/E ratio decreases to around 34.

Oracle, AI, Market, Growth, Investment